Your credit limit plays a bigger role in your financial life than just allowing you to spend more when using your credit card. Yes, getting a bigger credit limit can lead to being able to borrow large amounts of money, but it can also give your credit score a major boost if you know how to use an increase to your advantage.

Requesting a credit increase is pretty simple, so let’s look at how to increase credit limits and what the benefits of expanding your credit limit are.

How to increase credit limit on your credit card

The process of how to get a higher credit limit is pretty straightforward and you have three options for pursuing a credit limit increase. You can request a credit limit increase online, over the phone or through a lender invitation.

Generally, you can quickly request a credit limit increase through an online bank or credit account. The menu should have an option on it like “credit limit increase” or “credit line increase” that leads to you providing some personal financial information that the lender will use to evaluate if a credit limit increase is a good fit for you. You may have to share updated information about your income or monthly housing expenses. They may ask how much additional credit you’re seeking, so you’ll want to have a number in mind before applying.

While some lenders will grant a credit limit increase without performing a hard inquiry that can affect your credit score, others may do a hard pull before approving your credit limit increase. The lender should inform you in advance if they will do a hard pull, so you can decide if you want to proceed or not knowing that there will be a temporary hit to your credit score.

You can also call your credit card’s customer service number and request a credit limit increase over the phone. Like when applying online, you’ll need to provide the same basic information about your financial life.

Sometimes a credit card issuer will approach you about a potential credit limit increase without you having to request one. Lenders regularly invite cardholders to increase their credit limit, so keep your eye out for an email or online account message asking if you would be interested in additional credit. You may even receive a preapproved offer without having to apply or provide your current financial information.

Benefits of a higher credit limit

Getting your hands on a larger credit limit can be a really good step to take if you’re looking to improve your credit score.

Improved credit utilization

Five different factors are taken into consideration when determining your FICO credit score. One of the most important factors is your credit utilization ratio, which makes up 30 percent of your score and represents the amount of credit you have versus the amount of credit you’re currently using. For example, if you have $10,000 in available credit and are carrying a $2,500 balance, your credit utilization ratio is 25 percent. That’s a good ratio, because you want to keep your credit utilization ratio below 30 percent whenever possible. This is where a credit limit increase comes in. It’s a lot easier to keep your credit utilization ratio low if you have a higher credit limit.

More purchasing power

A higher credit limit also gives you more purchasing power—but tread lightly here because the bigger the balance on your credit card is, the lower your credit utilization ratio will drop. However, if you can pay off your purchases right away, having an increased credit limit allows you to spend more using your card, leading to earning more cardholder rewards.

Better terms in the future

An additional benefit of increasing your credit limit and landing a higher credit score at the same time, is that you may actually improve your borrowing terms in the future. The higher your credit score is, the better terms and lower interest rates you’re likely to qualify for in the future. Figuring out how to increase credit card limits now may save you money down the road when you apply for a new credit card or a mortgage or auto loan.

What improves your chances of being approved for more credit?

If you do decide that a credit limit increase is the right fit for you, you’ll need to understand how to raise a credit limit. The main thing you need to focus on is making sure that your credit habits reassure lenders that you’ll be able to pay off your credit cards in a timely fashion.

Before approving a credit limit increase, issuers typically want to know how much you’re earning and how much you’re spending on rent or mortgage payments. This is because they need to gauge whether or not you’re struggling to make ends meet, which would lessen the odds of making timely payments.

Issuers also look at account behavior, payment history and overall utilization levels, as well as how long you’ve had your account open and how you’ve handled it so far. Card companies want to feel confident that you’ll pay back any money you borrow, based on your income, assets and current obligations.

Some lenders also take your age into consideration, possibly because they view experienced credit holders as more experienced with handling the responsibility of an increased credit line.

How is your credit limit determined?

Your credit limit is determined in one of two ways. The credit card can come with a preset credit limit or the lender may offer you a credit limit based on your credit history and credit score. The latter is where having a strong credit history really comes in handy.

Whenever you apply for a new line of credit, lenders will take how you’ve used your previous credit opportunities before into consideration when deciding whether to give you the requested line of credit, how much credit to offer you and what kind of interest rate you’ll receive.

This is another reason why it’s a good idea for you to request a credit limit increase, as future lenders may consider your current credit limits when determining what credit limit to offer you. By showing them that you successfully handled an increased credit limit without maxing out your cards or falling behind on payments, you’ll be more likely to secure better terms and interest rates.

If you believe you can handle the increased responsibility of a larger credit limit, apply for one. You may benefit greatly by making this savvy money move.