A credit card is a payment card issued by a Marketing/financial institute, to withdraw money as credit in case of an emergency. If you are not interested in applying for a loan or don’t have the time to wait for approval of your application, a credit card can assist you during your emergency monetary crunch.
But, every credit card comes with a pre-specified credit limit. You might want to know how to increase the credit card limit. An enhanced credit card limit provides you with extra monetary support.
There are, however, few restrictions to increase your credit card limit.
6 tips to follow up on before applying for a credit limit increase:
Tip1. Know your CIBIL score –
A CIBIL score is a 3 digit number varying from 300 to 900. The higher your CIBIL/credit score, the better your credibility to successfully request an increase on your card’s credit limit. It is considered as a primary parameter to check the credit-worthiness of a borrower. An applicant should have a minimum credit score of 750 before applying for an increase in his credit card limit.
If the borrower has paid his/her previous loans/credits on time, their credit score will increase. You can check your CIBIL/credit score from the CIBIL website by following the below-stated steps:
- Fill a form on CIBIL’s website.
- Enter your personal details.
- Know your CIBIL score. After you have completed these steps, you need to pay a minimum fee.
- Once you have submitted these required documents and the fee, the CIBIL score and credit card report will be mailed to you.
One can apply for his/her CIBIL score offline by sending the required documents and a demand draft of the fee to CIBIL’s Mumbai office.
Tip2. Credit utilisation ratio –
Before you know how to increase the credit card limit, you should have a proper idea about your credit utilisation ratio for approval.
Typically, credit card providers prefer lenders who have a credit utilisation of 30-40% on their cards. Such a ratio showcases the borrower as a creditworthy user who is capable of paying the dues on time. The lender will be more inclined approve his/her application to increase the credit limit. A borrower with a credit utilisation ratio of 50% may be considered as a credit-hungry and denied from a credit increase on his/her card.
Tip3. Income –
Your income plays another major role in determining the credit card limit. Make sure you do not have any outstanding liabilities before you apply for an increased credit limit. A poor income to liabilities ratio also may lead to rejection of any application for credit limit increase.
Tip4. FOIR –
Your FOIR is your ‘Fixed Obligations to Income Ratio.’ If you earn Rs. 1,00,000 per month and have to repay a loan, including your other monthly expenses, and that leads to an expenditure of Rs. 40,000, then your FOIR is 40%.
A FOIR of 30-50%, varying between different individuals socio-economically, is of good creditworthiness. If your monthly expenses exceed your income by 50% and more, lenders might think you are not worthy to repay your availed credit. However, keeping the previously stated factors strong, a higher FOIR is easily overlooked.
You should also be selective about choosing your credit card. One of the best cards you can apply for is Bajaj Finserv RBL Bank SuperCard. It offers much more features in comparison to a regular credit card, offering multiple features including easy EMI options, instant approval and affordable charges along with other various benefits.
Tip5. Don’t apply for credits too frequently –
Whenever anyone applies for his/her credit, the lender sends a request to CIBIL for his/her credit score. This is called a hard inquiry. If the borrower applies for credit, whether for a credit card or a loan, within a small time span, it creates a negative effect on his/her CIBIL score.
A hard inquiry stays on your credit report for two years. Multiple hard inquiries lower the credit score and may lead to rejection to an application for a credit limit increase.
Tip6. Abide by your due dates –
Your credit card bill is generated on the same date of every month, which is your due date. There will be amounts mentioned on your credit card statement – the minimum amount and the total outstanding. It may be that you cannot pay the total amount on the same date.
Credit cards come with a grace period of 21 days. If you pay your total outstanding bill within the grace period, no penalty rate is charged.
However, if you cannot either pay minimum amount or the total amount within the due date, a penalty fee is charged along with the applicable interest rate. Apart from it, the amount is carried over to the next month. Keep you due dates and the grace period in mind to avoid unnecessary extra penal charges.
NBFCs like Bajaj Finserv provides pre-approved offers on credit cards, business loans, home loans, personal loans and numerous other financial products and services. Not only do these offers simplify the process of availing financing, but also help you save time. All you have to do is share a few necessary details and check your pre-approved offer.
Managing your credit card might seem a daunting task. And to apply for an increased limit, even more challenging. But with the right tips, a credit limit increase can be easy to avail. Now that you know how to increase credit card limit, go ahead and apply for it.
