A higher credit limit is possible with bad credit using a number of relatively effective techniques that lower risk to lenders or at least give the quantitative impression of lower risk. Some methods involve building credit score, others involve the mechanics of applying for credit cards. Depending on the credit card applicant’s timeline and existing situation, the right methods to use to get approved for high-limit credit cards vary. Some of the following methods can be used for applicants with no credit cards, whereas others can be used by people with or without credit cards.
• Know the lender’s policy
Creditors establish credit ratings using several factors. The credit report is a major influence, but ultimately the credit limit is set by the lender and not the credit rating agency. Knowing the lender’s policy on credit card limit increases helps borrowers know what they need to do to increase their credit limit. Such being the case, asking the appropriate lender representative about their credit limit policy can offer helpful clues to getting approved for high-limit credit cards with a bad credit rating.
• Lower credit utilization ratio
Credit utilization is a ratio used by creditors to determine how much debt payment capacity a borrower has, and the level of risk associated with lending to that client according to the Fair Isaac Corporation. A good way to help improve the chances of getting approved for a high limit credit card is to lower this ratio before applying. For example, if an applicant already has credit cards, pay the balances off to demonstrate ability to control debt and to lower the credit utilization ratio.
• Select applications carefully
Some credit cards are specifically designed for people with bad credit. These cards can be found using a credit card screener. Some creditors may be more likely to offer higher credit limits than others. Larger banks with aggressive lending programs may also be a good place to start looking. According to Smart Credit Choices, a credit card comparison website, applying for multiple credit cards increases the chance of obtaining a higher limit credit card. Moreover, also per the Fair Isaac Corporation, multiple credit inquiries generally have a low impact on credit score.
• Rollover credit card balances
Another way to get approved for a high-limit credit card with bad credit is to consolidate other loans. Lenders that want credit card business through consolidations may have to raise the credit limit beyond what would normally be approved to accommodate the credit card consolidation. However, if the consolidation is a response to an offer, this may yield promotional interest rates and may also be a good sign as the creditor may have actively pre-screened borrowers for consolidation loans. Investopedia, a financial information provider, recommends having the credit transfer fee waived in the event of credit consolidation.
• Prepaid and secured credit cards
If paying up front isn’t a problem, there’s a better chance of obtaining a higher credit limit on a prepaid or secured credit card. Moreover, even with a bad credit score, getting approved for a prepaid credit card with a high limit may prove to be relatively easy provided the card is paid for ahead as condition for approval. Additionally, having a high limit prepaid credit card may indicate to other creditors that a borrower is capable of managing a higher credit limit potentially making it easier to get approved fro non-prepaid credit cards with higher limits.
• Utilize credit building methods
Lastly, building credit score using methods endorsed by the Federal Reserve Board or the Federal Trade Commission can help credit card applicants receive a higher credit limit in the long run. These methods include reviewing credit reports for inaccuracy, correcting any mistakes on credit reports, paying off outstanding debts and establishing a strong bill payment history. Since credit score is a factor in the credit limit assessment, having a higher credit score naturally improves the probability of a higher limit request will be granted.