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Banks look at several parameters, such as income, and employment, among others, while determining the optimal credit limit for applicants. They also offer credit limit increase from time to time based on higher income declaration or good usage behaviour.
A credit limit increase is a reiteration of good credit standing and is like a pat on the back for one’s financial well-being. So, how does one go about securing a higher credit limit and what does it take to be eligible for higher credit limit?
Credit card applications are aimed at understanding and profiling customers with details like income, employment, residence type, ownership of other assets and loans availed of. By providing complete details and cooperating in the application process, such as during the verification process, applicants can help build a better profile and provide banks the ability to assess and assign a good credit limit.
A good credit score goes a long way in securing credit cards with higher or optimal limits. It is also a sign of prudent use of credit. Hence, ensuring timely payment of credit card and loan dues, both secured (home, auto loans) and unsecured (personal, credit card loans), helps in building a better credit score. Banks also look at steady credit usage and, hence, frequent or multiple inquiries for loan products can be avoided.
Card members would do well to use their card for all expenses. Consistent usage helps build good behaviour scores, in turn allowing banks to offer limit increase. Card members can consolidate spends on one or two cards instead of fragmenting spends over multiple credit cards. Regular spends like fuel purchase or payment of utility bills can be made using credit cards; this will help build good track record of usage and payment.
A permanent credit limit increase leads to the upward revision of the credit limit and is available until the credit card is open for use. Banks also offer temporary credit limit increase to card members for limited period and value to meet unexpected expenses.
Card members must exercise good judgment in usage and payment to build long-term relationship with their banks.
The writer is Senior Group President, Retail and Business Banking, YES Bank
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