Negotiating your credit card limit with an issuer is easier said than done. It is not that it is totally impossible to do so but it is quite a tricky and tough task. The most important thing while applying for a credit limit extension is, you need to be able to be worthy of it, especially in front of the bank. In a normal sense, a user would like to extend or increase their credit limit to be sure about having much money in need. Secondly, once a person is already holding a credit card, they are pretty much aware of how things work with the credit card.
Sometimes it may seem that the credit cards which used to come in handy every time, are now unable to bear all your expenses. Especially when the economy is too uncertain and the prices of everyday goods are skyrocketing. Well, these things will surely give rise to thoughts of having a higher credit limit. The process seems to have become very intimidating but if you are prepared then everything will be fine.
When you have the thought of getting your credit limit increased, you need to be prepared beforehand. It’s not that you will not get an extension if you give a wrong answer or something, but it’s better to be prepared for things. The bank might ask you for a few things but even before that, you will have to ask yourself a few questions.
What questions should you ask yourself before applying for a credit extension?
Q1. Are you earning more?
A1. The credit limit of an individual is determined by your ability to pay it back. A bank does risk assessment while confirming your creditability. The max credit limit is then further concluded by looking at all the information present. If your credit line is big enough, the bank will have confidence in you for the repayment of the loan.
Now, your creditability is determined by your earning and the credit limit by how much you are earning. You need to make sure that the type of extension you are asking from the bank, you will be able to make the bank confident about their investment. This should be determined by the earning you have right now and compared with the income you had at the time your credit limit was set. After checking this factor, the path forward becomes pretty much clear.
Q2. Is your Credit Score higher?
A2. Besides your income, your financial history is also important. Banks also check your Credit Score, if your credit score is around the decent and good category according to the bank’s standard. While checking your credit score, your credit history might also get involved. This is about how your spending and repaying behavior has been so far. It is also very crucial information about your credit which helps the bank determine how much risk they are actually taking.
Q3. How much do you want your credit limit to be increased?
A3. When we talk about the increased credit limit, there might be a certain amount to which you have in mind. And when the bank asks you for the same, you need to have an answer prepared for the same. Generally, it would be great to have a larger credit limit than the actual demand you have. So it is also better to ask the bank for their view about the same. As a thumb rule, it is always advised to keep your utilization below 30% of your credit limit so having a larger credit limit will also help you in keeping your overall utilization low.
Credit Cards Limit is determined by the bank and it is very important to have your answers ready in order to actually ace the situation. It will also be important to have all the answers prepared according to the bank’s standards.
A regular credit card user might find out that the credit limit they have is not sufficient for them. This thought will also give rise to many other thoughts such as of credit limit extension. While credit limit extension is not an impossible task but it is really important to have all the answers prepared just in case.
All the above-mentioned questions will help you guide in what and what will not help you in extending your credit limit. It is also very important to be worthy of the credit, you are applying for because the bank will also check your credit records for the same reason along with your income. In the end, it all depends on the bank and the type of credit card you own.