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Getting a higher credit limit on your credit card can be helpful or harmful, depending on how financially stable you are. If you can pay your credit card bill in full and on time every month, increasing your credit limit can give you more flexibility and help your credit scores by lowering your . But if overspending is a problem for you, it could be worsened by a higher credit limit.
Here are four ways to increase your limit, plus tips on how to know whether a credit limit increase is right for you.
If you’re a responsible cardholder with good or excellent credit, a higher limit can boost your credit by keeping your utilization low. Credit utilization, or the amount of your available credit that's in use, is a major factor in your credit scores. Low utilization is a sign that you're living well within your means, while high utilization suggests the opposite.
If you're spending most or all of your available credit every month — even if you pay off your balances — that can damage your scores. The general rule of thumb for good credit utilization is to use 30% or less of your limit on each card and overall.
Increasing your credit limit can be a helpful move after you’ve started earning more money, as your finances will have more flexibility. Say you typically put $500 per month on your credit card, and your credit limit is $1,000. Your credit utilization is 50%, which is above the recommended 30%. If your limit goes up to $5,000 with the same $500 of spending, however, your utilization drops to 10%, which can help your credit.
Even if you're sure you can get a higher credit limit, evaluate your reasons for wanting it. If you’re looking for flexibility or lower utilization, go for it. But if you need more credit because you're in a consistent state of financial emergency, a higher limit is unlikely to solve your problem and could even make it worse. Also, keep these things in mind: