A business credit increase can enhance your spending power and improve your credit utilization ratio, leading to stronger overall credit. And with a higher limit, your business will be better equipped to handle fluctuating expenses and cyclical inventory needs. In the following guide, you'll learn how to increase credit limits on your business accounts and how that can benefit your organization as a whole.
How are business credit card limits determined?
There are several factors that go into determining your credit limit. Similar to personal credit cards, lenders will review your history of on-time payments, the age of your accounts, any defaults, and more.
Your annual revenue is another relevant factor when determining your ability to repay borrowed money. The higher your revenue, the more likely you are to have a higher credit limit.
Lenders will also examine your debt-to-income ratio to determine whether you have a good balance between your revenue and expenses.
1. Request a credit limit increase
You might simply request a credit limit increase directly from your credit card issuer. Contact the bank or credit card issuer and submit a request to increase your credit limit. Many card issuers allow you to submit a request online or even through the mobile app. If you have multiple credit cards from the same card issuer, you can also request a credit limit increase online for an individual card.
An increase in your credit card limit is ultimately at the discretion of your credit card issuer. Before approving a credit line increase, they'll carefully examine such factors as your:
- Business credit score
- Business credit history
- Revenue
Basically, your credit card company wants to ensure that yours is a relatively low-risk business before extending more credit.
Credit limit increases may also be an option if you have a consistently high credit utilization rate. This means that you use a high percentage of your overall credit limit. Thus, if your credit limit is $10,000 and your balance is $3,500, your credit utilization ratio is 35%. A credit utilization ratio over 25% to 30% can damage your credit, so credit issuers may extend your credit limit to keep your usage rate low.
Case study: Raising credit limit thanks to BILL Spend & Expense
What happens when your credit card company or issuing bank declines your request for a credit limit increase? You may want to consider alternative solutions. That was the case for Underground Service Alert, a nonprofit that aims to bridge the gap between utility companies and those performing excavation work.
To manage employee expenses, Underground Service Alert issued company credit cards, but the issuing bank only gave them a limit of $65,000. Their credit limit increase request was denied — until they started using BILL Spend & Expense.
Thanks to BILL, the company is able to better manage its expenses. "Now with [BILL Spend & Expense], right off the bat, we got a million dollar credit limit," reports Bethany Dillon, accounting Clerk at Underground Service Alert. "We never hit that credit limit, but it's helpful," she says.
That's good news for companies seeking to manage employee expenses. It's also helpful for those working to maintain a low credit utilization ratio to improve their credit score.
*The BILL Divvy card is issued by Cross River Bank, member FDIC.
2. Apply for a new card
If your current credit card has a low credit limit, you can increase your credit limit by applying for a new card entirely. Here's how to get your credit limit increased in two distinct ways.
First, you can apply for a new credit card with a high credit limit. This eliminates any need to request a higher credit limit from your bank or card issuer. Instead, you can shop for a credit card company that already offers a higher credit card limit than your existing one.
Just be aware that a card with a higher credit limit may require you to meet specific eligibility criteria. If you have a lower credit score, you may not be eligible for a high credit limit on a new card.
Second, you can apply for an additional credit card that simply extends your company's purchasing power. Instead of increasing your credit limit on an individual card, you can take out multiple cards. For example, if your current card has a credit limit of $50,000, and you apply for a second card with a credit limit of $60,000, your total spending power will come to $110,000. Again, there may be additional eligibility criteria to be able to open an additional card. Contact the card company for additional questions.
Will a new card impact my credit score?
Credit card companies will take a deep dive into your finances when you apply for a new credit card. This involves a "hard credit inquiry," which can temporarily lower your credit score. To minimize the impact, try to avoid applying for too many new cards in a short period of time.
Replacing your current credit card can also affect your credit. Business credit bureaus calculate your credit score using several factors, including the length of your account history. If you close your oldest credit card, you'll shorten your business credit history, which can also lower your score.
How does a new card impact my credit utilization ratio?
Opening a new credit card can indirectly give your credit score a boost. That's because multiple credit cards will lower your credit utilization rate.
For example, if you have a business credit card with a $40,000 credit limit and your balance is currently $18,000, your current credit utilization ratio is 45%. But if you open a second credit card with the same credit limit ($40,000) and maintain an $18,000 balance on both cards, your utilization rate drops to only 22.5% ($18,000 out of $80,000).
3. Improve your credit score
To truly learn how to increase your credit limit, your best option is to raise your business credit score. Your business credit score serves as a numerical measure of your overall creditworthiness, and it will strongly influence the maximum amount of credit your bank or credit card company is willing to offer.
Business credit scores operate off of a different model than consumer scores. Typically, business credit scores range from 0 to 100, with higher numbers considered better. Alternatively, some scores are calculated using the FICO Small Business Scoring Service (FICO SBSS), which ranges from 0 to 300.
Improving your business credit score can improve your eligibility for a larger credit line. It also can enhance your eligibility for credit cards with a higher limit. You can achieve a higher credit score by:
- Paying your bills on time
- Keeping your credit utilization ratio low
- Managing your outstanding debt
- Diversifying your credit mix (having different types of loans/credit)
One of the most direct ways to improve your business credit score is by correcting errors in your credit report. You may be unaware of fraud or unauthorized activity that's artificially lowering your credit score.
How to find your business credit report
Business credit reports are available from each of the three major business credit bureaus:
- Experian
- Equifax
- Dun & Bradstreet
You can check your credit report for free once each year. Checking your credit won't lower your score, and it's usually a good idea to know where you stand before applying for new loans or a credit limit increase.
What to do if you find an error in your credit reports
Each of the above credit bureaus may provide slightly different scores. But if you notice that one bureau reports a score that diverges widely from the other two, there may be an error. Examine your credit report closely and notify that bureau of any inaccuracies you discover. Act quickly, as it may still take a while before corrections are reflected in your credit score.
4. Pay your bills on time
Paying your bills on time can have a direct impact on your business credit score. And paying your credit card bills on time can earn you favor in the eyes of banks and credit card companies. Credit issuers may be more receptive to a request for a higher credit limit if you have an established history of making on-time payments.
Tips for making on-time payments
You can work toward a positive payment history by staying organized. Many organizations are able to pay their bills on time by:
- Creating reminders for payment deadlines
- Automating bank accounts to pay bills
- Negotiating due dates to optimize your payment schedule
BILL offers accounts payable (AP) software that helps business leaders make fast, easy payments. Automated features streamline your procurement process and ensure on-time vendor payments. They can even automate payments to your credit card provider.
Case study: Timely payments lead to a higher credit limit
Your payment history can make a big impact on the credit limits set by your card issuers, and Bold Property Restoration can attest to this. Soon after the California-based reconstruction company was founded in 2020, it experienced rapid growth.
Unfortunately, Bold Property Restoration was strapped with a restrictive credit limit. This forced the company to rely on cash payments and reduced its financial flexibility. BILL Spend & Expense improved Bold Property Restoration's ability to make on-time payments. As it established a strong payment history, the business saw an increase in credit limit.
Armando Ramirez, the company's founder and CFO, shares that "BILL really alleviated a lot of the constraints around our cash flow...Now I use the BILL Divvy card for operational costs, overhead expenses, and other associated expenditures." BILL now also provides the automation that empowers workers like Ramirez to focus on other important duties as the company continues to thrive.
5. Keep your credit utilization ratio low
By now, you've likely seen the importance of maintaining a low credit utilization ratio. A lower credit utilization ratio will improve your overall credit score, which banks and credit issuers rely on to determine your eligibility for a credit line increase. What is an ideal credit utilization rate? Your credit won't see a major impact until your credit utilization ratio rises above 25% to 30%.
If you only have one credit card, you may need to work hard to stay beneath this threshold. But that doesn't mean it's impossible. BILL's Spend & Expense will help you make fast, automatic payments, which can keep your balance low. You can also open a second credit card to help you distribute your total credit card balance across multiple providers.
Credit lines from $1,000-5M* with BILL Divvy Card
Now that you've learned how to increase credit limit rates on your existing card, you might consider applying for a new corporate card entirely. BILL Spend & Expense offers the BILL Divvy Card powered by Visa. Users may qualify for a credit line as high as $5 million, pending approval of their application.
Businesses can rely on a credit card account that scales with your company. With no annual fees, flexible rewards, and access to virtual cards, BILL offers a solution that streamlines and improves the way you do business. Learn more today about how BILL can increase your credit limit through the BILL Divvy Card.
*Credit lines and the advertised range are not guaranteed and will be determined upon application approval.
Increasing credit limit FAQ
Does requesting a credit increase hurt your score?
When you request a credit card limit increase, your bank or credit provider may perform a hard inquiry into your credit history. This can lower your score on at least a temporary basis, but a higher limit has the potential to improve your score by reducing your credit utilization rate.
Will I get approved for a higher credit limit?
Not always. A credit increase is at the discretion of your provider and will be influenced by your financial situation, credit history, and other important factors.
What should I do if my credit limit increase is denied?
If your credit increase is denied, you can work to improve your credit score before trying again. You might also look into other credit cards with higher credit limits or to increase your spending power.
How often can I request a credit limit increase?
Some providers may offer an automatic credit limit increase, assuming you have a positive payment history. Most major credit card issuers allow you to request an increase every six months, though select providers permit you to submit a request every three months.