Is it a good idea to increase my credit limit?

It is possible to raise a credit limit but it is not always a good idea.  There are a number of factors to be considered.

The way to increase a credit limit is usually quite simple.  The credit card company will have a number of calls every day about increasing a credit limit and this will be part of the procedure of the call centre when dealing with credit card customers, and they will often have both a permanent and a temporary pre approved limit that they will be able to automatically approve a credit limit if this is asked for – or something below the credit limit.

If the credit limit can not be approved automatically then the credit card company may still approve the rise if there is a good reason, although the credit card user will probably need to talk to the manager or the customer retention officer.  This will mean that the credit card user can simply call up the credit card company to get their credit limit extended.  It can also be the case that the credit card provider will have the credit card limit increased automatically.

However there are reasons for keeping the credit limits at their current levels.

The credit rating of a person can be affected by credit limits, and affected in two ways.  Firstly a sudden increase in credit limits can be a typical warning signal to credit rating agencies, as can having a credit limit that is a multiple of the credit limit.

On the other hand the amount of borrowing that the credit card user has compared to the amount of the outstanding credit limit can also be a key variable for credit ratings.  This means that although in many cases it is a good idea to raise a credit limit, particularly when the credit card user has almost borrowed against his or her limit, it can also affect the credit rating unnecessarily if the borrower is nowhere near their current credit limit.

There are other factors that should be considered.  The amount of credit that is extended to a credit card user will at times be considerably above the ability of the credit card user to service that borrowing.  There is also the fact that raising a credit card limit will mean that a person does not need to plan or save for purchases, which can be a useful financial discipline.