It's possible that you didn't ask for or even desire an increase in your credit limit, but the fact that you got one indicates that the company that issued your card considers you a better-than-average borrower. But what would happen if you applied for a new credit card and the firm that issued it to you gave you a credit limit that was quite modest, to begin with? What would happen if, after the first year, that restriction was not increased? What ought to be the limit of your credit? Should you submit a request for a raise? The answer to the last question is yes, and several compelling arguments support this position.

Increase Your Credit Score

Your credit usage ratio will decrease if you raise the total amount of credit you have accessible to you. This is sometimes referred to as the percentage of your available credit that you have used. When evaluating your credit score, one of the things that FICO looks at is your credit use ratio. Having a high credit utilization ratio might harm your credit score. As you can see, increasing your credit limit decreases your credit usage ratio and will enhance your total credit score over the long run. However, this effect will only occur if your spending does not grow exponentially at the same time as your credit limit.

Increasing the limit on your credit card only gives you more opportunities to make purchases outside your financial capabilities, right? Certainly not in every case. If you are responsible for your credit management, raising your credit limit might have a lot of benefits for you. It is possible, for instance, that it will assist you in repairing your credit, conveniently making significant purchases, or using credit to address an emergency. Your credit score can go up if you have a bigger credit limit. An increase in credit limit might give you at least six important advantages.

1. Lowers Your Credit Utilization

Your credit score will take a hit according to the FICO scoring methodology if the amount of credit you have utilized is getting near the entire amount of credit available to you. This is because creditors believe you might risk taking on excessive debt, making it more challenging to meet your future payments. Even though these risks do not truly apply to you, the way the scoring model works, your credit score might suffer when credit usage ratios climb, and this can happen even if these risks do not apply to you.

2. Cheaper and Easier to Get Loans and Additional Credit

If your credit score is higher, you will have a greater chance of being accepted for a credit card, auto loan, or mortgage. These three financial products are all dependent on your credit score. You will also have a greater chance of receiving a lower interest rate since your credit score will decide whether you will be provided the best available rate or a higher rate that has been risk-adjusted for you. You will be offered the best rate if you have a good credit score.

3. Helps in an Emergency

If you have a true emergency that you cannot pay for with cash, having a credit limit much higher than your typical spending quantity provides you with a resource that you may use. Let's say you're on the road and suddenly realize you must alter your itinerary and get back home. It's likely not going to be a cheap option to modify your aircraft ticket, but using a credit card to pay for a plane ticket is very easy.

4. Enables You to Accumulate Additional Rewards

You may begin charging all your costs to your credit card if you have a history of paying off your credit card amount in full and on time, but you do not currently do so. Your ability to do so and the number of benefits you accumulate, such as cashback, points, or travel miles, might improve if you have a bigger credit limit.

5. Lets You Make Large Purchases Efficiently

You are already aware that paying for significant purchases using a credit card is easier and that doing so may help you rack up points faster. You may not be aware of this, but the likelihood is high that your credit card comes with various consumer safeguards that can come to your aid if there is an issue with the product or service you purchased.

6. Helps You Avoid Credit Score Dings

Obtaining a new credit card is one approach to access more credit; however, extending the limit on an existing card may be a preferable choice in certain circumstances. According to FICO, your credit score may hit if you create a new credit card account. When you create a new account, the length of your credit history is reduced; this is problematic since a long history often results in a higher credit score.