A credit limit is the maximum amount of money that a lending institution will let you borrow. Your personal credit limit will be determined by a lender by considering the information you provide in your application, your credit score and your credit history.
If you’re thinking about increasing your credit limit, you should consider the reasons why you may want a higher cap. You may be looking to increase your credit limit to access additional funds or to improve your credit utilisation ratio; however, applying for a higher credit limit may have positive or negative implications on your credit score and you should only make the request after careful consideration.
Your credit limit alone doesn't affect your score, but the way you use it can. If your credit limit increases, but you don’t borrow more funds than you previously used to, your credit utilisation ratio will decrease. This can demonstrate to lenders that you are a responsible borrower who only makes use of the funds they need, rather than taking out all the credit available to them. This may have a positive impact on your credit score, and you may be eligible for credit at better terms in the future.
Every time you apply for credit, the lender will review your credit history as part of their decision-making process. This review appears on your credit report and may influence your credit score. Although, increasing the credit limit on an already agreed account may trigger a hard enquiry, applying for several different accounts in a short period of time may have a more unfavourable impact.
Having access to a credit with a higher limit than your usual spending amount can give you a safety net in a genuine emergency when you require the extra cash.
If your credit limit increases, and you borrow the maximum amount of funds available to you on a regular basis, your credit utilisation ratio will increase. This can indicate to lenders that you are not a responsible borrower. It may have an adverse impact on your credit score, and you may not be eligible for credit at better terms in the future.
Hard enquiries appear on your credit report and having too many in a short time frame may influence your credit score. This information is used by lenders to determine whether you are a conscientious borrower and may affect your credit eligibility in the future.
Lenders will usually review your account every 6 months and may choose to offer you a credit limit increase if you are eligible for one. This is less likely to trigger a hard enquiry on your credit record and it is more likely that your financial circumstances allow for a credit increase.
Asking for a credit limit increase within 6 months of obtaining your credit may signal to the lender that you are experiencing financial difficulties and may impact your credit suitability in the future.
When applying for a credit limit increase, the amount you request should cover for your financial needs without compromising your creditworthiness. Asking for a very high limit may set off red flags that you are unable to manage your finances. On the other hand, asking for a very low limit may cause you to tap into a larger proportion of the available credit. This will result in your credit utilisation ratio increasing, which may negatively impact your credit score and cause you to appear as an irresponsible borrower even though your credit limit is low. Considering how much you can set aside from your salary each month may help guide you to a sensible credit limit for your circumstances.
Using a large proportion of your available credit on a regular basis can indicate to a lender that you are in constant financial difficulty which may decrease your chance of successfully raising your credit limit.
Once you have an approved Polar Credit Line, your limit will increase or decrease in line with our Agreement with you. To be eligible for a credit limit increase you need to use your Polar Credit account sensibly and make your repayments in a timely manner.
We will review your account every six months and if we are able to increase your credit limit, we will contact you by email so that you can confirm if you would like to go ahead with a limit increase. You can also contact us in advance of your semi-annual credit limit review to request that we increase your credit limit. You may be asked to provide further information. All credit limit changes whether proposed by us or requested by you are subject to a creditworthiness and affordability assessment.
Please ensure you act as a responsible borrower and do not agree to increase your limit if you feel you may not be able to keep up with your repayments. We base our lending decisions on the latest information available to us, however this does not mean that you have to increase your credit limit if you do not want to do so.