Does Declined Credit Limit Increase Affect Credit Score?

Credit limit refers to the amount of money that one is allowed to spend using his or her credit card. They occasionally check your accounts to find out whether you are suitable for an increase in your credit limit. However, when getting a credit limit increase, one may be surprised only to be declined an increase. And how does this impact on your credit? Let me help you with the following information.

What happens when you request a credit limit increase?

Your credit card provider will run your credit record for a mild credit check when you ask to have your credit limit raised. Soft inquiries let creditors go at your credit records without compromising your credit score. They find out from this data whether you qualify for a greater limit.

Legal requirements regarding credit card providers' honoring of your demand for a credit limit increase are none. For some reason, even if you have a decent credit score and have asked for it, can do it. For example, they could believe that the present limit satisfies your needs. They could have also observed other signals indicating increasing financial risk levels.

Will the fact that you are asking for a lower credit limit due to a decline in the limit granted negatively affect your credit rating?

The short answer is no. Credit card issuers only pull a credit report when considering an increase in your credit limit. Soft inquiries on the credit report have no impact on the credit score. Thus, applicants who get declined for a higher credit will not see their scores drop instantly.

The only time a declined credit limit increase request is bad for your score is if you make lots of credit purchases out of anger. Every application initiates a hard inquiry process which may accumulate and consequently reduce your score. Do not apply for more credit after being turned down for an increased credit limit.

What could be the reasons that a Company would deny my request for further credit?

There are a few reasons why credit card companies deny limit increase requests, even from customers with exceptional credit.

1. High Balances: If your balances are consistently near or at the current limit, a creditor may fear that additional available credit may lead to further spending.
2. Short Credit History: Some credit card companies too would like to ensure that one is capable of handling credit limits in the long run. If you are just establishing credit, establish a longer credit history before applying for more.
3. High Inquiries: A lot of requests for auto loans, mortgages, and other new accounts opening within a short time could indicate more credit risk to lenders. Do not apply for credit if you have high inquiries.
4. Income Not High Enough: A credit card issuer can deny you a higher credit limit even if you have a perfect credit score because, in its view, you don’t earn enough to warrant it. Higher limits usually come with higher incomes.

How to Approach Your Credit Card Company for Approval for a Higher Credit Limit Without Compromising Your Credit Score?

If you want a higher credit limit, here are some tips to ask while protecting your credit score.

• Wait for an Invitation: It is a common practice where issuers extend the credit limits of existing customers before making an offer to them. When you receive them in the mail, simply leaping at these offers won’t entail a tough credit check.
• Review the Reasons: If you apply for an increase, and you are declined, pick up the phone and get in touch with the credit card company and ask why. Consider the reasons before making another one.
• Boost Income: Increased incomes mean increased limits. Inform credit card companies of any changes in your earnings, such as a pay increase or receiving a better-paying job.
• Adjust the Timing: It is recommended not to apply for an increase when you are in a bad financial position such as losing a job or other credit obligations appear on your credit report. Be patient and wait until your credit file becomes a bit stable.
• Request Soft Increases: When applying for additional credit, you should enquire from your card issuer if they can conduct a ‘soft pull’ on your credit report. This may increase your chances of approval with no hard pull.

Therefore, the rejection of requests for increased credit limits should not lower your score as long as the credit card company pulls your report gently. However, when credit increase applications are declined, one should consider reviewing other aspects of their financial status before requesting for more credit. Applying for credit after several rejections also hurts your score.

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