Qualifying for a UK credit card is a major feat these days because criteria are much more stringent. However, getting a card is only half the battle. When the card is issued, it comes with a credit limit. This is the amount of money the cardholder may spend with the card. The credit score of the applicant determines the credit limit of the card. The first limit is usually a provisional limit that may be increased in the future.
When you apply for a credit card, the lender uses a scoring sheet to determine your credit limit. Each lender has different criteria and thus, different scoring sheets. A low credit limit does not always mean that credit rating is bad. One lender may offer a low limit but another may offer a higher one. The UK does not have regulations for credit card limits but the UK Cards Association published best practice guidelines on the topic in January 2011.
Credit card companies use multiple factors to establish credit limit. Cardholder payment history, amount of credit currently available, and other outstanding credit card debts are among them. The recent credit crunch and resulting governmental push for responsible lending have made it more difficult for consumers to receive high credit limits initially or to increase credit limits. Most lenders provide customers with a provisional credit limit that allows them to assess the financial responsibility of the cardholder for approximately three to six months.
Once the lender feels that the cardholder can financially manage a higher credit limit, it will increase the limit. Cardholders who use their credit card responsibly within the first several months may receive an increase without asking, which is what the government is trying to eliminate. However, the UK Cards Association believes that an incremental increase in credit limit enables cardholders to manage their credit and encourages them to borrow responsibly.
In most cases, you cannot increase your credit limit during the initial several months of receiving a credit card unless you decrease the limit on another card. Even this does not guarantee an increase for the new card, as the provider must approve it. Decisions are made on an individual basis and additional information may be required. If another card limit is decreased, it cannot be changed again for six months.
If you pay your debts and bills on time, make more than the minimum required payment, and have not reached your credit limit in the past, the provider may agree to increase the limit. If your credit rating is poor, the provider will be less inclined to make a change. Take the steps mentioned to prove to the provider that you can manage a higher level of debt and borrowed money responsibly.
One alternative that may be available is a temporary increase in credit limit. This is designed to increase the limit for a specific purpose like a car deposit or holiday payment. Contact your provider with this request to see if anything can be done. However, avoid making too many requests for credit limit increases.