How requesting a credit limit increase affects your credit

Credit card issuers put a credit limit on their cards, which represents the maximum amount you are allowed to charge. But if this ceiling is lower than desired, you can try requesting a credit limit increase. That begs important questions: Does requesting a credit increase hurt your credit score? Can it actually improve your credit? And can your limit be increased automatically?

The answers depend on many factors. Take the time to learn more about a credit limit increase’s impact on credit score, the pros and cons of a credit limit increase, the right time to request an increased credit limit, how automatic credit increases work, and whether issuers can reduce your credit limit.

How does applying for a credit limit increase affect your credit?

The impact of a credit limit increase on your credit score partially hinges on how it comes to pass. Lenders often have a process through which cardholders can request credit line increases, which usually results in a hard credit inquiry and a temporary decrease in your credit score. But in some cases lenders automatically provide increases if you meet specified criteria. When this happens, a limited or soft credit inquiry is typically conducted by the lender, exerting no impact on your credit score.

Beyond the initial trigger for getting an increase, here is how a credit limit increase can hurt or help your score.

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How can a credit limit increase hurt your credit score?

If the credit increase is not automatic and you actively request it, expect your lender to conduct a hard credit inquiry. While this could temporarily lower your score by a few points, likely no more than 10, the effect is generally short-lived. Nevertheless, the request itself remains on your credit reports for two years.

If you are worried about the potential impact of a hard inquiry on your score, you can ask the credit issuer about considering a smaller increase request with only a soft inquiry.

“Another drawback to requesting an increased credit limit is that creditors may see you as a risk and someone who might be heading for financial trouble if you have multiple hard inquiries on your credit reports,” says Severine Bryan, an accredited financial counselor with Bryan Financial Empowerment LLC. She adds that this status may get you denied for new loans or lines of credit.

Indeed, if your total credit limit is fairly high relative to your income, it can harm your ability to be approved for future loans and credit accounts.

How can a credit limit increase help your credit score?

On the plus side, a credit limit increase can improve your credit utilization ratio, which can increase your credit score.

“Credit utilization refers to the amount of debt you carry compared to your total credit limit,” explains Lamine Zarrad, CEO and founder of StellarFi. “Credit utilization accounts for up to 30 percent of your credit score – which is why a credit limit increase can give your score a boost.”

For example, Zarrad continues, imagine you have a card with a $1,000 credit limit and a $400 balance. If your credit limit jumps to $2,000, your credit utilization rate will dip from 40 percent to 20 percent, and your credit score should improve.

Whether you receive an automatic increase or your request is approved, your credit utilization should decrease, contributing to a boost in your credit score. This assumes, of course, that you don’t immediately accumulate significant charges with your newly expanded credit limit.

Benefits and drawbacks of a credit limit increase

While an expanded credit line can offer increased flexibility in spending, it may not always be advantageous. As mentioned earlier, credit inquiries can have negative effects on your credit. It’s also crucial to recognize that an approved larger credit line might lead to additional debt. If you lack the necessary self-control to handle additional spending power, it’s not a good idea to raise your credit limit.

On the other hand, if you require additional credit so you can take on additional budgeted expenses without going over your credit card limit, having more spending power can yield significant benefits, provided you can manage it responsibly. Frequently, a higher credit limit results in a lower credit utilization ratio, potentially enhancing your overall credit score.

When should I ask for a credit limit increase?

You can request a credit limit increase at any time, according to Bryan.

“However, it makes sense to do so only when your credit report reflects responsible money management,” she says. “Creditors are more likely to reward good money behaviors with an increase. A good reason to request a credit increase is if you are in danger of using the maximum on the card and need some extra wiggle room. This will allow you to protect your credit utilization rate. Another good reason is to increase your spending power by having more credit available to you.”

Here are several good reasons to request a credit limit increase.

When something positive happens (specifically income-related)

If you want to improve your likelihood of success, seek a credit line increase when positive changes have occurred since obtaining your card. Those changes could include an increase in household income, an improved credit score or a reduction in your overall debt.

On the flip side, try to avoid requesting a credit limit bump if any of the following circumstances have arisen: a job loss or a reduction in income; a significant decrease in your credit score; being at, near or surpassing your credit limit; recent instances of missed payments or payments below the minimum; or the recent addition of new credit.

When you have a strong credit background

On opening a new card, it’s possible that the issuer sets a smaller credit limit than you’d like. Be patient. Typically, eligibility for an increase means maintaining on-time payments for six to 12 months. During that time, ensure your payments surpass the minimum required amount since the credit limit increase approval often considers the current account utilization. Therefore, striving to keep the percentage at 30 percent or less can enhance your chances of getting an increase.

“However, while you certainly don’t want to max out a card, I think if you’re only using a small fraction of your credit limit, the lender might wonder why you need more credit and could actually be more likely to turn you down,” says Ted Rossman, senior industry analyst for Bankrate.

When time has passed since your last credit limit increase request

Excessive inquiries could give the impression that you are preparing to spend more extravagantly. This could lead to potential rejection, and if a hard inquiry is conducted, the resulting impact may be more pronounced.

Submitting numerous requests for credit or credit limit increases is generally unwise. If you’re denied, ask your issuer why. Before requesting another increase, correct the factors that led to your prior denial.

How to increase your credit limit without hurting your score

Most lenders provide a process for requesting a credit limit increase, whether through phone or online channels. To consider your request, your lender will require certain information, such as your current income and employment details, regardless of whether they conduct a hard inquiry. You have the option to inquire about the possibility of a hard pull and, as mentioned earlier, explore the potential of avoiding it with a lower increase threshold.

“One way to increase your credit limit without harming your score is to verify with creditors that they will conduct a soft inquiry rather than a hard inquiry when pulling your credit information,” suggests Bryan.

Rossman seconds that advice.

“I’ve gotten higher credit limits from American Express, Capital One and Wells Fargo with only a soft credit check involved,” Rossman says. “I suggest asking customer service if it will be a hard or soft inquiry before you apply for a credit limit increase,” he recommends.

Before making any decisions, check your three free credit reports and rectify any errors you may discover to ensure your credit is in excellent condition.

How do automatic credit increases work?

Sometimes card issuers will increase your credit limit automatically, without you requesting it, especially if your account remains in good standing for a long period.

“This can be a business decision on their end, especially if they see you are spending more, and they may try to incentivize you to charge even more with the card,” Rossman says. “Card issuers also periodically ask for income updates, so they might raise your credit limit if your income has increased or if your credit score has risen.”

An automatic credit increase is more likely if you make consistent on-time payments, have low credit utilization and have few hard inquiries.

“You are more likely to receive automatic increases if you regularly and responsibly manage your current credit cards and other debts,” Bryan notes.

Should you increase your credit limit if offered?

If an issuer extends you a credit limit increase offer, your credit didn’t undergo a hard inquiry and accepting the increase can positively influence your utilization. However, if you fear that an expanded credit limit might tempt you into overspending, it’s advisable to reconsider. This decision is subjective and personal, but it’s an important one. It’s essential to understand that additional credit does not equate to increased income; it’s just another way to spend the money you already have budgeted.

“You should only increase your credit limit if you know it won’t cause you to spend more, it will reduce your utilization rate, you have a major purchase planned and an increase will give you breathing room to pay, or the increase is something that you want,” advises Bryan. “If you don’t carry a lot of debt and you manage your money well, it may be wise to take the credit increase because it will increase your spending power.”

What should you do if you get a credit limit increase you don’t want?

If your credit limit increases automatically, without your requesting it, you don’t necessarily have to accept it.

“You should let your credit card issuer know that you do not want the increase,” suggests Bryan.

Rossman agrees.

“You could always ask for your lower limit back, although that wouldn’t be ideal for your credit score. Nevertheless, it can make sense if you are worried about overspending with a higher credit limit,” he says.

Can your credit limit be reduced?

Want less temptation to spend beyond your means? You can request a credit limit reduction. This can be an effective strategy especially if you want to apply for another card with the same issuer.

“Lowering the limit on your current card can give the issuer more room to offer you a new card,” says Bryan. “Or, let’s say you are going through a divorce and your spouse has an additional card on your account that is in your name only. You might want to take away the ability of the other person to charge up balances on the card and leave you with that debt.”

Or, even better, remove authorized user status from your soon-to-be ex-spouse entirely.

Your credit limit can also be reduced without your request at the card issuer’s discretion.

“This is especially common when the economy takes a turn for the worse and lenders may worry that a spike in unemployment could lead to a spike in delinquencies and defaults,” Rossman says. “It’s also possible you might exhibit risky behaviors – such as maxing out a card or paying late – which could lead the issuer to cut your limit. Keep in mind that a lower credit limit is generally not desirable, since it can lead to a lower credit score and less purchasing power.”

The bottom line

It’s smart to learn what your current credit limit is and if and how it can be increased – either upon request or automatically. If you seek an increase, carefully consider how it can affect your credit score and how you will use the card responsibly without overcharging beyond your means.