5 tips to increase your Credit Card Limit

Credit Card limits are never enough ! are they? Do you feel that you need a higher credit limit on one or more of your credit cards?

Increase Credit Card LimitAnd the bank has not yet increased the limit inspite of your good and steadily increasing credit score?

Fret not, here’s a quick and easy to understand 5 tips to help you increase your credit card limit(s):

  1. Pay your Credit Card bills on time: Paying your bills in full and on time demonstrates your ability to responsibly manage the current credit. Find out whats your billing date and pay-by-date. And this is what banks need to see before they even think of increase the credit exposure to you (or your cards). Also as mentioned in other FS Desk articles, do pay a few days in advance if you still pay using cheques etc. Best option for paying your credit card bills is to mark a Standing Instruction, so that all payments happen digitally and on time. Also follow these practices to improve your credit score through your credit card.
  2. Do NOT use your full Credit Limit: If you end up using a very high percentage of your credit card’s limit regularly, it is an indicator of need for extra credit. And high dependency on the specific bank’s credit limit. In such cases banks would feel uncomfortable in increasing their exposure. It is better to limit the usage of credit to a max of 30-35% of the limit. This signals a comfortable use of credit line extended by the banks, and they would want to explore the option of increasing your limit.
  3. Use your Credit Card(s) regularly: While you may want an increase in the credit limit, the banks go by the data that you generate on your usage, spends and repayments. If there is infrequent usage of the card, the banks would not get the sufficient data to flag you off as a potential line increase case.
  4. Build a strong case for Credit Limit Enhancement: If it comes to putting up your own request for a limit enhancement, build a rock solid case. Show good and responsible credit behaviour (timely repayments in full etc). Show increase in salary or income – this will signal a capability to handle more credit without a risk of default. Show a decrease in other EMIs or loan outflows. Did you just pay off a car or home loan in full and are no longer burdened by its EMI? This might be another factor that can help you build your case. Look for other instances in your financial history that showcase a positive change in your credit repayment capabilities.
  5. Choose which card(s) you want a line increase on & when: If you have multiple cards, it might be prudent to check which of those cards you want to apply for a credit limit increase. Multiple factors would come into play. Which is your preferred card for most of your transactions, which card gives you a lower APR, which card has a better rewards program and most importantly, does the bank do a Credit Bureau check before any credit limit increase. Please note that most credit score checks can result in a downgrade in score. Hence choose your bank and time it well. Time it basis your current Credit Score.

Don’t know what your current card limit is? Learn how to read your Credit Card Statement

Must know about Home Loan Guarantor

Who is a home loan guarantor?

A loan guarantor is someone who stands guarantee for the timely payment by the loan seeker.

Lending is a risky business for all financial institutions. The sanctioning of a home loan is not just about the assets or the current financial status of the applicant but also an attempt to view the future with the help of the given data. There are a lot of ‘what if’s’ involved. What if he is unable to clear the home loan? What if he dies? What if he runs away? And many more myriad questions that need some sort of answers before the sanctioning officer can sign on that dotted line. Banks and other financial institutions need some kind of a security to ensure that they will be able to recover the outstanding amount in case of any untowardly event. Though, repossessing a property is an option but it involves a lot of complications (such as auctions etc), so banks prefer to use it as the last resort. Hence, most of them require one or more guarantors before they can sanction a home loan.

home-loan-guarantorA guarantor is a person who agrees to pay the loan in case the borrower is unable to do so. There is significant paper work involved and the guarantor has to sign a deed of guarantee. Moreover, the bank also looks at the guarantor’s credit history, age and income. Many banks allow relatives to become guarantors. Some even allow friends and acquaintances to become guarantors.

Guarantors are required in case of sole applicants or people with transferable jobs or people who don’t have any professional qualifications or people who tend to spend a lot of time abroad due to their jobs.

Becoming a guarantor also impacts your own loan-taking capacity.

PSU banks have taken a lead in taking the name and shame approach for loan defaulters. Now apart from the loan applicant, the loan guarantors are also being targeted. Allahabad Bank published photographs of two loan defaulters, along with their loan guarantor and seems to have initiated a trend. So far the name and shame approach had been restricted to putting up the photos and names of defaulters in newspapers, neighbourhoods of the defaulters and branck branches.

So, think before you finally say yes. Many try to become good Samaritans by becoming guarantors for their friends and colleagues only to find that the bank is hot on their tracks just because their friend defaulted on his payments or better still simply disappeared!