Tips on building a solid credit limit to tap into if needed

Relying on a credit limit in a shaky economy is the equivalent of expecting a weak bridge to weather a storm and carry you to survival.

Even as an uncertain option, a credit limit is still a bridge worth preserving to supplement or back up an emergency fund, especially before a potential recession. There isn’t a foolproof strategy to prevent an issuer from lowering credit limits or closing accounts, but some actions may minimize the impact to your wallet and credit scores.

Keep credit cards open and active

It’s worth keeping credit cards open and regularly charging planned purchases to give issuers one less reason to touch your account, but that might not be enough.

For Timothy Barnes, an auto mechanic based in Rocky Mount, North Carolina, it didn’t matter that he was still employed in late 2020 with active accounts in good standing. A major issuer closed several of his accounts, scrapping over $17,000 in available credit.

“It was one day of buying something online and the credit card was declined,” Barnes says. “They said it was a risk, but I didn’t even miss one single payment.”

In May 2022, the CFPB’S advisory opinion on the Equal Credit Opportunity Act affirmed that lenders must provide an “adverse action notice” explaining the reason for unfavorable decisions.

Consider requesting a credit limit increase

Consider requesting a higher credit limit on frequently used credit cards if you’re paying on time and not using more than 30 percent of your available credit. Income is another factor considered by issuers for a credit limit increase, says Derek Mazzarella, a certified financial planner at Glastonbury, Connecticut-based firm Gateway Financial Partners.

“If your income has gone up since you last filed for the credit card or you haven’t updated that in a while, I would make sure your income is actually updated,” Mazzarella says.

Credit scores could temporarily drop when requesting an increase, depending on the issuer, so ask how credit is impacted before doing so.

One of the biggest factors in credit scores is utilization, or how much credit you have available to you compared with how much you’re using. A credit limit hike can increase the available credit and help build credit scores. The opposite is true if a credit card issuer hacks away at a credit limit later — scores will take a hit. One issuer’s reductions may even have a ripple effect on other credit cards’ limits.

Diversify credit limits

Consider building other bridges by opening a credit card at a different institution if you don’t have one already. If you tend to overspend, stick with a lower credit limit to rein in spending, Mazzarella says.

A new card application may cause credit scores to drop temporarily, but likely not as much as a credit limit reduction. For flexible spending, look for a general-purpose credit card that’s accepted by most merchants.

Manage credit limits strategically

Use your available credit with caution so it stays manageable. If possible, keep finances under control by:

■ Managing current credit cards responsibly before opening another.

■ Spacing credit card applications by six months or longer to lessen the impact on credit scores.

■ Using less than 30 percent of available credit.

■ Paying more than the minimum on time.

■ Having an emergency fund to avoid relying on credit cards.

■ Creating a plan to pay off large purchases before adding to a card’s balance.

■ Asking credit card issuers to keep your credit limits or accounts open if they intend to take actions on them.