How Stabilizing Your Credit File Will Improve Your Score

When you get a call from the bank saying you’re eligible for a higher credit limit, is your automatic answer “yes”? Read on to understand why it’s not always a good idea.

How does a credit limit really work?

If you’re already a bank customer (for example, you have your payroll or savings account there), it’s very likely they’ll offer you a credit card—that’s how many banks cross-sell to their customer base.

To set your limit, banks usually review your account activity (income, spending) and your payment behavior. Over time, as they observe your spending patterns and income flow, they may propose raising or lowering your limit.

• If you only make minimum payments, you’re unlikely to be offered an increase.

• Your limit can be reduced if there are delinquencies or a risk of default.

• If you pay on time and have stable income, your chances of getting a call offering an increase go up.

Your income matters, but it’s not everything: consistent on-time payments carry a lot of weight when evaluating an increase.

What can you do?

In general, banks review a card’s limit after 6 to 18 months and may offer increases (sometimes 50% or more). A limit change impacts your profile—if it gives you breathing room and you can control your spending, consider it.

• Aim to use only 30%–35% (or less) of your available limit to avoid overutilization.

• If you’re worried about overspending, you can request a temporary increase by contacting your branch.

Pro tip: Before accepting, ask whether the increase involves a hard inquiry with the credit bureau, whether your rate or fees will change, and whether you can adjust the new limit later.