Does Requesting a Credit Limit Increase Hurt Your Score?
You might be concerned about whether requesting a credit limit increase could affect your credit score. Understanding how it works will help you make an informed decision.
April 11, 2022
One of the particularly important aspects of using a credit card is understanding your credit limit. In a nutshell, your credit limit defines how many charges you are authorized to make on your card.
While lenders may set a relatively low limit at first, many are willing to increase your credit limit over time. While a credit card company may sometimes reach out to you directly with an offer to increase your credit card limit, many individuals find themselves in a position where they need to request a credit limit increase themselves.
Before submitting such a request to your lender, you may ask yourself, “Does requesting a credit limit increase hurt my credit score?”
Here’s what you need to know about trying to obtain a higher credit limit.
Understanding your credit limit, credit utilization and available credit
First, there are some important terms that are helpful for cardholders to understand when it comes to credit card utilization. Regardless of whether you use a Visa, Mastercard or American Express card, these basic principles remain the same:
Credit limit: Your credit limit is the total amount of debt you can carry on your credit card at one time. For example, if you have a $2,000 credit limit on your card, that is the maximum amount your card provider will let you spend. Once your credit card balance reaches that $2,000 limit, your card will be declined when you try to use it. To be able to make additional purchases, you must pay off some or all of your current balance.
Credit utilization:Credit utilization measures how much of your credit card limit you’ve used. This is directly related to your available credit — when one goes up, the other goes down. Sticking with the $2,000 limit example, if you currently have a balance of $400, your credit utilization ratio is 20% (400 divided by 2,000). Your available credit is $1,600. Keeping track of the amount of credit available to you will ensure you don’t overspend.
Individuals who find themselves with a high credit utilization rate may wish to increase their credit limit so they can increase their spending power and budgeting flexibility. A higher limit will also result in lower credit utilization, since you’ll have more available credit. Ideally, keeping your total credit utilization ratio below 30% will be beneficial for your credit score.
How does my lender determine my credit card limit?
Your lender sets your initial credit card limit when you apply and qualify for a new credit card. The credit card issuer will typically start by looking at your credit history and credit score.
Issues such as making late payments or missing monthly payments on other accounts (like utility bills and other credit cards) may result in a lower credit limit. On-time payments show your reliability as a borrower and make lenders more willing to give you a higher limit.
Your credit card provider will also look at your current credit utilization ratio and your debt-to-income ratio when determining your card limit.
The better these ratios are, the more your provider will be willing to let you spend with your credit card account. That’s because they’ll have greater confidence in your ability to manage your new credit limit.
You may be able to get an automatic credit limit increase
Your credit cardlender may automatically update your card limit, giving you access to additional credit without you needing to make a request. This is typically done if you’re a longstanding cardholder and have a good payment history. They may also up your limit if your income has increased.
Instead of doing this automatically, some providers will send an email or message via your online account inviting you to increase your credit limit.
The good news is, these provider-initiated increases won’t harm your credit score at all. In fact, they may actually help your credit score, since the higher credit limit can lower your credit utilization ratio.
Does requesting a credit limit increase hurt your score?
You don’t have to wait for an automatic credit limit increase; you can actually request one from your credit card company. Many card issuers allow you to make this request either through your online account or over the phone.
When you submit a request yourself, your provider will typically ask why you want the credit limit increase and have you submit updated financial information, such as your income level and housing expenses.They may also ask what you want your new credit limit to be — so be prepared with a realistic request.
Your updated information is weighed against your history with the credit card company to determine if you qualify for an increased line of credit.
Now, does requesting a credit limit increase hurt your score? It depends. You’ll need to ask your credit card provider whether they will perform a hard inquiry or a soft inquiry on your credit report as part of this process.
A hard credit inquiry, or “hard pull,” can temporarily lower your credit score by up to five points. However, if you submit several hard credit inquiries during a short period of time, it can make you appear to be a risky investment to lenders and further lower your credit score. Though your score will probably go back up after a few months, the temporary decline is important to keep in mind if you are planning to apply for other loans.
A soft inquiry, on the other hand, does not affect your credit score at all. If your lender performs a soft inquiry, you don’t need to worry about any negative impact on your score.
Rather than requesting a credit line increase with your current provider, you could also apply for a new credit card. This will give you more total available credit, even if the new card has a low limit. While applying for a new card will result in a hard pull, responsibly managing multiple accounts can help increase your credit score in the long run.
Use your available credit responsibly
Regardless of whether your card provider offers automatic credit limit increases or you need to submit a credit limit increase request yourself, responsible use of your credit card is what matters.
By taking steps like trying to avoid carrying a balance from month to month or making the minimum payment by the statement due date, you can maintain a good payment history and improve your credit score.
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