If done correctly, raising your credit limit is a simple method to raise your credit score.
You don’t have to keep your credit card as the emergency only piece of cash stashed in the back of your wallet. In actuality, your credit card can be a fantastic financial tool given the abundance of cards that allow you to earn rewards like cash or airline miles. However, you might not have a very high spending limit if you opened your account right out of college or when your credit score wasn’t that great.
The good news is that you can ask for an increase in your credit limit. But you might be wondering, “Does requesting a credit increase hurt my score?” The good news: probably not. Before you ask, though, learn how to increase your limit without lowering your credit score.
Spoiler alert: It depends
Long-term credit score increases can result from asking for a credit limit increase, even though doing so may temporarily lower your score.
Let’s dive deeper into the intricacies of credit limit increases and their impact on your credit health,
The Two-Sided Coin of Credit Limit Increases
The Potential Downside: Hard Inquiries
Your issuer will probably make a hard inquiry into your credit report when you formally request an increase in your credit limit. Your score may be negatively impacted by this inquiry by a few points, but the effect is typically transient (less than 10 points) and goes away in 12 to 24 months.
However, the quantity of hard inquiries you have on file may have an impact on your creditworthiness as a whole. Lenders may become suspicious of excessive inquiries made in a short amount of time, which could make it more difficult for you to get loans or open new credit lines in the future.
The Potential Upside: Improved Credit Utilization
The benefit of raising your credit limit is that it may improve your credit utilization ratio, which has a positive impact on your credit score. This ratio reflects the percentage of your available credit that you’re currently using.
In the event that you have a $1,000 credit limit and a $400 balance, for example, your credit utilization rate is at 40% If your credit limit is increased to $2,000. Your utilization ratio will decrease to 2020%, which could result in an improvement in your credit score.
The Automatic Increase Advantage: Soft Inquiries
Sometimes, credit card issuers may automatically increase your credit limit without you even asking. In these cases, they often conduct a soft inquiry, which doesn’t impact your credit score. This is a win-win situation, as you get a higher credit limit without any negative consequences.
The Takeaway:
Requesting a credit limit increase can have both positive and negative effects on your credit score, depending on the type of inquiry conducted. However, the potential long-term benefits of improved credit utilization often outweigh the short-term downsides of a hard inquiry.
When to Request a Credit Limit Increase
So, when is the right time to ask for a credit limit increase? Here are a few scenarios:
- Positive Financial Changes: If you’ve experienced an increase in income, improved your credit score, or paid off significant debt, these positive changes strengthen your financial profile and increase your chances of approval.
- Need for Increased Spending Power: If you anticipate needing more credit for planned expenses without exceeding your limit, a higher credit limit can provide the necessary breathing room.
- Automatic Increase Offer: If your issuer extends an automatic increase offer, accepting it can be beneficial, especially if it involves a soft inquiry.
When to Hold Off on a Credit Limit Increase
There are also situations where requesting a credit limit increase might not be the best move:
- Recent Negative Credit Events: If you’ve recently experienced job loss, income reduction, or credit score decline, it’s best to wait until your financial situation stabilizes.
- Excessive Inquiries: If you’ve already made multiple credit inquiries recently, adding another one could further harm your score.
- Overspending Concerns: If you struggle with managing your credit card spending, a higher limit could lead to increased debt and financial strain.
The Bottom Line: Weighing the Pros and Cons
Ultimately, the decision to request a credit limit increase depends on your individual circumstances and financial goals. Carefully consider the potential benefits and drawbacks, and make an informed choice that aligns with your overall financial well-being.
How Is Credit Limit Determined?
Your credit limit is the maximum amount of money you can borrow against at one time. Card issuers determine the size of your limit based on a few factors.
For one, your payment history will play a big role. You’ll probably receive a higher limit if you’ve always paid your bills on time than if you’ve missed a few payments. The number of open accounts you have and the total amount of credit available to you will also be taken into account by issuers. how much you owe. Your income is also important, as you need to be able to afford your monthly payments.
Ultimately, the exact reasoning behind your credit limit is up to the individual credit card company. However, you’ll probably get a higher limit if your credit score is high and you’ve shown that you can borrow responsibly in the past.
How to Request a Credit Line Increase
If you want to increase your credit limit, usually all you have to do is ask. According to Mike Sullivan, a personal finance consultant at Take Charge America, a nationwide nonprofit credit counseling and debt management organization, “creditors usually don’t mind increasing credit lines.” “In fact, they welcome it if they believe you will use it and pay. ” Here are a few ways you can go about it.
Request Online
Many card issuers make it easy to ask for a credit limit increase. All you have to do is log into your account online and navigate to the card services page. Here, you may find an option to request a credit limit increase. If so, choose this option and input any data that you are asked to update, including your monthly housing payment, work status, and annual income. In many cases, youll receive a response right away as to whether your limit has increased.
Call Your Issuer
In the event that there isn’t an online option for you to request an increase, you can contact customer service by calling the number on the back of your card. Again, the issuer may ask for some basic financial details, so have that information ready. You may get an answer right away or need to wait up to around 30 days.
Wait for It to Happen Automatically
It’s possible that your card issuer has already increased your credit limit if you’re ready for one. It is common for credit limit increases from issuers to be given as a benefit for responsible spending on a regular basis and on-time bill payment. But according to Rod Griffin, senior director for consumer education and advocacy at credit bureau Experian, most major card issuers won’t automatically raise your credit limit until you’ve made on-time payments for at least six to twelve months and haven’t gone over your credit limit before.
If youre denied an increase, consider opening a new card instead. “Different lenders have different policies. One may be trying to limit credit while another wants to expand it,” says Sullivan. You can get the same advantages as having the limit on your current card increased by applying for a new card and keeping it close to zero. Just keep in mind that applying for a new credit card will result in a hard credit inquiry.
Read:
Does requesting a credit limit increase hurt your credit Score?
FAQ
Does requesting a credit increase hurt your credit score?
Is it worth it to ask for a credit increase?
How often should you ask for a credit limit increase?
Is there any downside to increasing credit limit?
Does asking for a credit increase hurt your credit score?
It’s also possible that asking for a credit increase could help your credit score rather than hurt it. If a card issuer approves you for a higher credit limit, the result might be a decrease in your credit utilization rate.
Will a credit limit increase affect my credit score?
Requesting a credit limit increase on its own shouldn’t affect your credit scores. But the type of credit inquiry your credit card issuer uses to evaluate your request could. Generally, your lender will review your credit history when deciding whether to approve your credit limit increase request.
Will a hard inquiry affect my credit score?
But a single hard inquiry will generally only cause your credit scores to drop by a few points. And the inquiry will only show up on your credit report temporarily. If you have a Capital One credit card, requesting a credit limit increase won’t result in a hard inquiry.
Does a new credit card affect your credit score?
By opening a new card and keeping your balance to a minimum, you can reap the same benefits as having an existing card’s limit increased. Just keep in mind that applying for a new credit card will result in a hard credit inquiry. Best Cash Back Credit Cards. Your credit limit alone doesn’t affect your score, but the way you use it can.