If you have a credit card or overdraft but want to increase your credit limit, how can you go about it? Find out what you can do to increase your limit and, more importantly, whether you should.

What is a credit limit?

This is the maximum amount you can spend up to on a credit card or an authorised overdraft.

Credit cards

When you apply for a credit card, you won’t usually know what the credit limit will be, athough you might be told what the maximum limit is for new customers.

You might only be told what your credit limit is when your application is successful. In some case, this can be a real problem. This is because you might only find out your credit limit when a full search has been carried out, which leaves a mark on your credit file.

For example, if you want to transfer an existing balance to take advantage of a 0% deal but your new credit limit is too small to do so, you might be disappointed.

If the credit limit matters to you, ask the card provider what it will be before you apply and before you sign the credit agreement.

The card provider should be able to give you an idea of how much you’re likely to be offered. But they might need to do a credit check before they can confirm the exact amount.

Are you shopping around for a credit card and not yet ready to apply? Then make this clear and ask the lender for a ‘quotation search’ or ‘soft search credit check’, so a mark isn’t left on your credit file. But not all lenders will provide this service. 

Overdrafts

Depending on what type of current account you have, you might be able to agree with your bank to have access to an overdraft, and they’ll set a limit for this. If you go over this amount, your bank might either agree to give you an overdraft or refuse to make the payment. But bear in mind that this could damage your credit rating.

To avoid this, you’ll need to contact your bank to discuss increasing your overdraft limit beforehand if you think you're likely to go above it. Your bank might consider that a larger overdraft wouldn’t be in your best interest or affordable, and can refuse to increase the limit.

Your overdraft will also be regularly reviewed by your bank. This means it can be reduced or withdrawn at any time. This doesn’t necessarily mean you’ve done anything wrong. 

Before you increase your credit limit

Can you afford it?

Whenever you’re considering increasing the amount of credit you want to take on, it’s important to work out whether you can afford the repayments and the interest that will be charged.

Overdraft interest rates have changed since April 2020 and are typically over 40%, while credit cards can also charge a significant interest rate unless you’re in a 0% period.

Why do you need to increase your credit limit?

Think about why you want to increase the amount you can borrow, and whether this might create the risk of you running into difficulties.

There could be many reasons for extending your credit limit – for example, maybe you use your credit card to pay for work-related expenses before claiming them back.

If your typical monthly expenses suddenly grow, it might be a good idea to increase your credit limit to avoid a cash-flow problem.

If you regularly pay your credit card bill in full each month and have a consistent income, the bank or card provider might agree to the increase.

However, perhaps you want to increase your credit limit because you’re struggling to meet all your outgoings, including credit repayments.

If this is the case, increasing your credit limit is only going to add to the problem and it might be helpful to seek advice before getting into more difficulties. 

Downsides of increasing your credit limit

Even if you think you’ll be able to manage borrowing more, increasing your credit limit might not be the best thing to do.

Having a higher credit limit might encourage you to spend more. This means you would end up facing larger repayments than you would have done.

If you’re regularly using your overdraft, this can also affect your chances of qualifying for other kinds of credit, such as a mortgage.

However, having a high credit limit doesn’t necessarily impact your chances of being approved for further credit. 

Increasing your credit limit

If you’re not happy with your credit limit, you can ask for a higher limit from your bank or credit card provider.

However, if you’re a new customer, it’s a good idea to wait for several months first. This is so the lender can see that you reliably make repayments on the credit amount initially agreed with you.

If you exceed your existing limit on your card or miss any payments, your card provider is unlikely to agree to increase your limit.

How you manage your overdraft will usually appear on your credit report, and might affect your chances of being approved for other kinds of credit.

When you’ve been with a bank or card provider for a while, they might offer you a higher credit limit without you having asked for it.

You don’t have to accept this. You can reject the proposed increase (or ask for a smaller increase). And you can also make it clear when you take out the card, or at any point, that you don’t want to be offered any future increases. For example, you might be worried you would be tempted to overspend.

If you decide you don’t want an increase, let the card provider know – they should make it easy for you to opt out.

If your card provider refuses to increase your credit limit

Lenders usually decide whether to increase your credit limit by looking at your credit reference file, as well as making other checks. They won’t give you a higher limit if they think you can’t afford it or are likely to default. 

Don’t go over the limit of your overdraft without authorisation

Whatever you do, don’t simply keep spending when you reach the limit on your overdraft. This is because your bank could decline any payments you have made that take you over your authorised limit.

If you’ve been refused credit

If you’ve been turned down for credit, it’s important you don’t just keep on applying elsewhere. Makings lots of applications will have a negative impact on your credit rating.