How to increase your credit limit -- without asking

You may wish your credit card had a higher limit - perhaps you want a little extra cushion in case of emergency, or you want to be able to spend more on your credit card each month to earn more rewards. You even may have heard that a higher limit could increase your credit utilization ratio and, consequently, your credit score.

There are a couple of ways to get a credit limit increase. You can call and ask for a credit limit increase, and you may be successful, but you can also earn one naturally. Canadian banks periodically scan through client databases to find customers who would be receptive to a credit limit increase. When they find these customers, the bank pre-approves a credit limit increase.

Barry Choi, a credit card expert at personal finance website Money We Have, says the pre-approval can be used to increase existing credit or to suggest a new credit card or line of credit.increase-credit-without-asking

Since 2010, the Financial Consumer Agency of Canada (FCAC) has required express consent from borrowers for each credit limit increase. So, the increase isn't valid until you give your consent. You may be able to consent via a bank employee, ATM or even your online banking portal.

You can earn a higher limit by following a few simple rules:

1. Pay on time, and don't use too much credit at once.
The two biggest factors of your credit score are credit utilization and repayment history, accounting for 35 per cent and 30 per cent of your score, respectively.

Your credit utilization ratio is how much credit you have available compared to how much you use. You may hear that you should keep this ratio below 50 per cent, 35 per cent or 25 per cent, depending on who you talk to or what you read. Most experts won't give a definite percentage, so bottom line is keep your credit utilization as low as possible. This ratio takes into account all the credit that you have and use, whether it's credit cards or other products.

Your repayment history is, of course, your payment behaviour on your credit products. To stay in your card issuer's good graces, pay your bills on time each month and always make at least the minimum payment. It's best to pay your balances in full when possible.

2. Use your credit card (wisely).
To demonstrate that you can handle your current limit, you should use your card regularly. For instance, use it for at least one or two purchases per month, then pay off those charges.

A great way to ensure you are using your card regularly is to set up a recurring bill payment or subscription using your credit card, then pay off the balance before the due date, says Nelson Smith, a loan officer with alternative lender Drumheller Financial Services.

You can also use your credit card for everyday purchases, then pay off what you've spent each week. You don't have to wait for the due date to pay off your balance.

According to CIBC's website, good spending habits and whether balances are paid in full are two things it considers when deciding whether to increase a customer's credit limit.

All of these actions will increase your credit score, making you a better candidate for a credit limit increase.

3. Don't have too many other credit products
Choi says banks look for clients with high credit scores and low amounts of available credit.

While it's good to have various credit products in your name, you don't want to have too many unused credit cards laying around, either. This makes you look like a risk to banks. Your bank has no way of knowing what you're going to do with thousands of dollars of available credit, so you may not get offered a credit limit increase if you already have a lot of unused credit to your name.

To be safe, Choi says, plan out your credit needs. Don't apply for a mortgage if you're hoping to increase your credit limit.

4. Show off to your bank
You don't need to have a bank account or savings account at the same bank as your credit products, but it does help if you'd like to be pre-approved for a credit limit increase, says Choi.

For example, sign up for direct deposit at your job to demonstrate to your bank you have a steady income stream. Beef up your savings accounts to show financial responsibility and to prove you have the means to repay any balances on a higher limit credit card. RBC, one of Canada's largest banks, publicly states it requires up-to-date income and rent/mortgage information before offering more credit.

Once your new, higher limit is secured, protect it
The worst thing you could do after getting a credit limit increase is to form bad credit habits, such as carrying a balance or not paying on time.

Your bank can also lower your score at any time, says Smith, so you don't want to have your new limit snatched back in a few months' time.

For consumers who want to keep their credit utilization low or those who make large purchases on credit, receiving a credit limit increase without asking is a welcome surprise. With a bit of financial and credit management, consumers can make themselves into prime candidates for credit limit increases, without having to call the bank to ask.

See related: What is a credit utilization ratio?, 5 surprising ways you can sink your credit score
Updated June 21, 2017

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