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Does increasing your credit limit affect your credit score?
Yes, increasing your credit limit (the amount that you’re allowed to spend on one of your credit cards) does affect your credit score—usually by raising it. This is because one of the main factors that’s considered in the calculation of your credit score is the percentage of your available credit you’re using (known as your credit utilization rate).
Your credit utilization rate is inversely correlated with your credit score. If your card issuer raises your credit limit, the percentage of your available credit that you’re using will drop, which usually will boost your credit score.
For example, let’s say you have a credit card with a current balance of $600 and a card limit of $1,500. That puts your credit utilization at 40%, which is relatively high (it’s ideal to keep it under 30%, and under 10% if at all possible). 1 If your card issuer increases your limit to $2,500, then your utilization rate will drop to 24%, which is slightly better. This will probably increase your score.
How increasing your credit limit can hurt your credit score
Unfortunately, increasing your credit limit doesn’t always boost your score. Here are a couple of ways that it could end up damaging your credit:
- You could start spending more: How much credit you should have depends largely on your spending habits. Increasing your credit limit won’t benefit your score if you use it as an excuse to start spending more. If you get carried away and rack up too much credit card debt, then your credit utilization rate will stay the same or increase, and your score will suffer. If you’re only looking to raise your limit because your credit card has been declined for going over limit, you should adjust your spending habits before committing to more credit.
- Your request might trigger a hard inquiry: If you request a credit limit increase yourself (instead of passively accepting one that your lender offers) your card issuer may run a credit check. This could trigger a hard inquiry, which can temporarily take a few points off your credit score (around 5 points off your FICO score and up to 10 off your VantageScore credit score). 2 3
How to request a credit limit increase
Requesting a higher credit limit is generally a quick and easy process, although exactly what steps are involved depends on your card issuer. Some companies may ask you to apply on their website or their app. For others, you’ll need to call a customer service representative.
Usually, your card issuer will ask you to provide the following personal information: 4
- Your employment status
- Annual salary
- Records of your rent or mortgage payments
- Reason for requesting a higher credit limit
You’ll also need to tell them how much you want your new credit limit to be.
Your credit card company may automatically increase your credit limit.
You don’t always need to ask for a credit limit increase. Credit card issuers usually review your account details every 6–12 months, and they may automatically raise your credit limit if they notice an increase in your income or credit score. 4
When should I request a credit increase?
You should ask for a credit limit increase when your card issuer is most likely to approve your request. It may be a good time to ask if the following conditions apply to you:
- Your credit score has increased since you opened the account: Having a good credit score shows that you manage your finances carefully, meaning your creditor is more likely to trust you to repay larger debts.
- You have a history of repaying your balance: Your creditor will look favorably on your request if your credit report shows a spotless payment history and you consistently pay off your credit card balance each month.
- You just received a raise: Getting an increase in your salary improves your debt-to-income ratio, which shows your creditor that you can manage more debt.
- You have fewer expenses: If you’ve paid off some of your other debts or your outgoing expenses have dropped for some other reason, then this will also reduce your debt-to-income ratio and show your creditor that you can handle having more debt.
When shouldn’t I request a credit increase?
If any of the following apply to you, you’re unlikely to qualify for a credit limit increase: 5
- You’ve only had your credit account for a few months
- You recently asked for a higher credit limit or applied for new credit
- You have a bad credit score
- Your income has dropped
- Your expenses have increased significantly
- You’ve made multiple late payments or you’re currently late paying one of your bills
Under these circumstances, you might be better off waiting until your situation improves before applying for a credit increase. If you’re able to lower your debt-to-income ratio, rebuild your credit, or establish a strong payment history, your card issuer will be more likely to approve your request.