What should you do if your credit limit is really low?

Many people have been miffed over the fact that they have received a low credit limit on a new card to the point where they decide to close the account. While this is an understandable response to the situation, you may be doing yourself more harm than you think by not working around the situation.

When you open a new credit account, that card’s age is factored into your overall credit score as part of your creditworthy criteria. Consequently, if you have one or several accounts that are opened and immediately closed, this affects the average age of all the cards on your account and could potentially lower your credit score. Of course, this is in addition to the hard inquiry that shows up just for applying, as well as any others that show as a result of you looking for another card.

The reason that you may have encountered this problem is because different creditors will assess you differently based on a variety of factors, including your current debts vs your overall available credit line, and your history of payments. Credit card companies with whom you have lots of positive history are more likely to extend you larger lines of credit based on the amount of time you’ve been a customer.

Unfortunately, there are no specific steps to rectifying the problem because cards with higher credit limits are harder to obtain, and those with poor credit may find that they simply cannot obtain very high balances by virtue of their credit score.

Many times, your best bet is to simply as the creditor to raise your limit. This works some of the time, but more often than not they want you to display a positive repayment history for a period of three to six months before such an increase will be considered. If this is the case, you’re better off using the card and paying off the balance in full each month on time to give yourself the best chance at receiving an increase when the time comes. If you meet the repayment criteria and haven’t incurred significantly more debt over the evaluation period, you will most likely be able to obtain the credit limit increase.

As discussed above, the card has already been placed in your file by the time it’s in your hand, so you should resist the urge to close the account out of frustration. Instead, try to make the card work for you as a tool to building an even better credit report and score.

You should also consider what other alternatives may be available to you aside from borrowing in the first place. Is this credit limit increase for something that you really need? If so, have you explored all possible alternatives? You may find that there are more affordable options available. If your intent was to transfer an existing balance to the card, you can still do so up to the current credit limit, taking into account any fees associated with this transaction so you do not get into an overdraft fee or penalty APR.

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