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Do Credit Limit Increases Hurt Your Credit Score?

Get smart about credit limit increases.

Good credit is important. It opens doors to lower interest rates and affects future loan approvals for big purchases. So, having more available credit can be better, but here’s what you need to know to build credit the right way.
 
Two factors primarily determine if a limit increase will hurt — or help — your score: your credit utilization and the type of inquiry the lender is performing.
 

Your credit utilization

 
As with many considerations, it’s all about balance. If your credit limit is increased, but your spending balances stay the same, you’ll be using a lower percentage of your total available credit. This reduces your credit utilization percentage, which will improve your credit score. If, however, you spend more because you have additional credit available, this will increase your utilization percentage and hurt your credit score. So, the increase itself does not hurt your score — and may even improve it.
 
Your spending behavior is what matters. Strive to keep your balances less than 30% of your total available credit. For example, if you have $10,000 available credit, you should keep your balance under $3,000. Keeping your credit utilization below 10% is considered excellent. Remember: 30% of your overall credit score is based on utilization.
 

The lender’s inquiry

 
When you apply for a mortgage, another type of loan, a new credit card, or a credit increase, the lender will make an inquiry. If the inquiry requires pulling your credit report, this is called a hard inquiry. Hard inquiries will reduce your credit score by 10 or fewer points. Hard inquiries stay on your report for two years, so the strategy of opening a bunch of cards just to have credit can be detrimental. If you’re shopping for a mortgage or large loan and several inquiries are made in a short period of time because you’re shopping for the best rate, these will be grouped together to appear as only one hard inquiry.
 
Some lenders which you already have an established history and track record with may be able to make a soft inquiry that doesn’t require pulling your credit report. Soft inquiries don’t hurt your credit score. Sometimes,
a smaller increase can be given without requiring a hard inquiry. Ask what amount will make the difference. 
 
Our advice? Ask if the lender will be making a hard or soft inquiry before formally requesting an increase. 

What else you should know before getting a credit limit increase 

Before you ask 


Request a free copy of your credit report before you request a credit limit increase. If you don’t like what you see, there are ways to fix errors on your credit report or rebuild your credit score. Most errors can be fixed in as little as 30 days.
 
You’re entitled to a free report every 12 months — without hurting your credit — from each of the three major credit bureaus: Equifax®, Experian®, and TransUnion®. Be sure to make your request through the only federally authorized site, AnnualCreditReport.com.
 

When to ask

 
There are times when an increase request is more likely to be approved. Ask and you may receive, if you:
  • Got a pay increase
  • Paid an existing debt in full
  • Have a proven track record of paying your bills on-time for at least six months
  • Continually pay more than the monthly minimum
  • Have had a steady revenue stream for several months
  • Have maintained a credit utilization of 30% or less
 If your request is refused, however, it should only affect your score for a month or two.
 

Sometimes, you don’t have to ask at all

 
Certain lenders will grant you an automatic increase, with new cards especially, if your credit usage meets specific parameters. This does not hurt your credit score — unless you increase your credit utilization percentage, too.
 

When not to ask

 
Don’t request an increase if you:
  • Have a history of making late or less than minimal payments. Late or missed payments remain on your report for up to seven years
  • Recently filed bankruptcy. Bankruptcies can remain on your account for up to 10 years
  • Asked within the past few months
  • Requested an increase on other cards within a couple of months. Space your requests out over time
 

What goes up must come down

 
Your lender has the right to lower your credit to mitigate its risk without advance notice. According to Experian, your limit could be lowered if:
  • Your income has been reduced
  • You don’t use or rarely use your card
  • Tough economic times are changing your credit habits
  • You missed one or more payments
When this happens, your best move is to manage your credit utilization percentage. Having a lower total available credit without reducing your spending will drive your percentage ratio up. You can ask for a limit increase on another card or apply to open a new card, but other lenders may not be willing to take the risk. We recommend trying to reduce your balances as much as possible.

 

The bottom line

As long as you keep your utilization low, increasing your credit limit is more than likely going to be a benefit to your credit score. If you think you'll be tempted to spend up to your limit, carrying that higher debt will likely outweigh any potential benefits from increasing your limit. Make sure you seriously consider the impact before making a request!
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