Does Requesting a Credit Limit Increase Hurt Your Credit Score?

Having a good credit score is important for getting approved for loans and credit cards with the best terms. So naturally, many consumers wonder if certain actions like requesting a higher credit limit could negatively impact their scores In this article, we’ll take an in-depth look at how credit limit increase requests affect your credit score and share some tips for managing your credit wisely

How Credit Scores Work

First let’s quickly review the factors that make up your credit score. The FICO credit scoring model examines these five main categories

• Payment history – Are you paying your bills on time?
• Credit utilization – What percentage of your total credit limit are you using?
• Length of credit history – How long have you had credit accounts?
• New credit inquiries – How many new accounts have you opened recently?
• Credit mix – Do you have experience with different types of credit like cards and loans?

Payment history and credit utilization account for 65% of your score. The number of new inquiries and your overall credit mix each make up 10%. The length of your credit history is 15%.

Hard vs Soft Credit Inquiries

For new credit, the lender will look at your credit report to decide if they should give you credit. This means that there is a “hard inquiry” on your report. If you get too many hard questions in a short amount of time, it can hurt your score.

However, a “soft inquiry” doesn’t affect your score at all. They are made when you check your own credit or when a lender makes you an offer before you even apply. Depending on the bank, asking for a credit limit increase could lead to either a hard or soft inquiry.

The Effect of Credit Limit Increase Requests

Here are a few key points on how requesting a higher limit could impact your credit:

• Hard inquiries: Your score might go down a few points if the bank does a hard inquiry to look into your request. But one inquiry alone likely won’t significantly damage your score.

• Soft inquiries: Your score won’t change at all if the bank only does a soft pull, or looks at your account history with them.

• Denied requests: Denials after a hard inquiry could make further requests in the short term more damaging. Too many in quick succession looks risky.

• Higher limits and utilization: As long as you don’t increase spending significantly, a higher limit could improve your utilization ratio and scores.

Tips for Managing Your Credit Score

Here are some tips to keep your credit score in excellent shape if you request a credit limit increase:

• Only request an increase when you have a genuine need for the higher limit. Don’t just request more available credit for no reason.

• Ask your card issuer if they do a hard or soft pull first. If it’s a hard inquiry, consider if the request is worth it.

• Don’t open too many new accounts rapidly. Space out requests over time.

• Make sure you can manage the higher limit responsibly and not rack up more debt.

• Pay balances in full each month to keep credit utilization very low, 10% or less if possible.

• Monitor your credit with a free service to stay on top of changes.

• Maintain positive credit habits, like paying all bills on time every month.

Being smart about credit limit increase requests and managing higher limits responsibly will keep your credit score in excellent shape. Check your credit reports regularly and aim to improve areas like credit utilization. With good habits, an occasional request likely won’t hurt your score much, if at all.