- Your credit utilization ratio is a ratio of how much credit you have in relation to the amount of debt that you have. When you have a lower credit utilization ratio, this reflects positively on you with the credit bureaus. One of the biggest factors in calculating your credit score is this ratio. If you get your credit utilization ratio down below 30 percent, your credit score is increased. Getting a bigger limit, while keeping your debt at the same level, improves this ratio.
- Another reason that you may want to increase your credit limit is that it increases your purchasing power. Your credit limit is the amount of money that you can spend on your credit card. If you need to make a big purchase, you may need to increase your credit limit before this is possible. Credit cards are a form of short-term lending that you can use at your discretion. A bigger balance gives you more freedom financially.
- Another reason that you may want to increase your credit line on your credit card is so that you can consolidate your bills into a single account. Many people have multiple credit cards with balances on them. If you can transfer all of the balances from your various credit cards onto one high-limit credit card, it can give you a single payment every month. If the card is a new one, it may have a 0 percent introductory rate, which will save you money on interest.
- Although increasing your credit card limit can help you in several ways, it also can lead to financial problems in the long run. When you have a very large credit card balance, it can be difficult to pay off. The minimum payment is based on how big your credit card balance is, and if the balance is too high, the payment may not be affordable. Having a bigger limit might tempt you to spend more money than you can afford.
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