What to do if your credit limit increase request is denied

Recently requested a credit limit increase only for it to be denied? Worry not. Here is a useful guide on what you should do next.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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It can be quite frustrating to receive news that your request for a credit limit increase has been denied. After all,  rejection of any kind is never fun. Thankfully, you still have a few options. Let’s explore a few of them.

Why might you want a credit limit increase?

There are two main reasons you might want to request a higher credit limit:

  • You are looking for a way to access additional funds, perhaps to make a big purchase, or to cover an unexpected expense.
  • You are looking to increase your credit score by improving your credit utilisation rate.

Why would your credit limit increase request be denied?

Your request could be denied for a number of reasons. Let’s take a look at some of the most common.

Your account is too new 

Many credit card companies will not consider you for a credit limit increase unless you’ve had the card for at least three to six months (or even longer). If you’re wondering when is the best time to speak to your lender about an increase, take a look at our article on when to ask for a credit limit increase.

You have a low credit score 

A low credit score signals that you’re too much of credit risk and are not currently worthy of more credit. But this can be fixed. Check out our tips on how to improve your credit score.

You have a record of late payments

Late payments tell the credit card issuer that you are already having problems managing your existing credit.

You have a history of only making the minimum repayments 

 If you only ever make the minimum repayments, your issuer might naturally assume that you cannot really afford a higher credit limit.

Your income is too low

Issuers will often use your income to determine whether to increase your limit. If it’s too low, it’s unlikely that your limit will be increased.

You have too many recent credit applications

This might be an indication that you are taking on too much credit or that you are in some kind of financial trouble that you are desperately trying to overcome using credit.

You have too much available credit

Some people might be tempted to overspend and therefore incur major debt when they have too much available credit. A higher credit limit will only increase this risk, and some lenders are simply not willing to take a chance by raising your limit.

What can you do after your credit limit increase request is denied?

The best thing to do is to note the issues flagged by the company for your denial and take steps to address them. This could mean:

  • Making an effort to pay some of the debt that you already owe.
  • Getting better at making your payments on time.
  • Paying more than the minimum amount each month.
  • Using your cards more regularly. This will allow the issuer to understand your spending and pay-back behaviour better. You can demonstrate that you’re a profitable cardholder, and that that the issuer might benefit by raising your limit.
  • Checking your credit report for errors. Credit reports contain far more errors and inaccuracies than many people realise. If you’re sure you’ve been handling your credit well but are still rejected for a credit limit increase, order your free annual credit report from the three major bureaus (TransUnion, Equifax and Experian) to check for any errors and get them fixed. 

Is there an alternative to a credit limit increase?

Yes. You could apply for a different credit card that offers a higher limit. This is a good option if your credit score is in good shape. If you’re looking to make a big purchase, consider a 0% credit card that offers an introductory period with no interest on new purchases.

Keep in mind that a denied credit card application will affect your credit score, as each application records a hard search on your report. Therefore, only apply if you’re confident about your chances of approval.

Takeaway

While it can be frustrating to be denied a credit limit increase, it can also turn out to be a learning experience. By understanding the reasons behind your rejection, you can take action to correct or avoid them in the future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

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