Does Requesting A Credit Line Increase Affect My Credit Score?

Introduction Credit scores are a crucial part of your credit status and affect you in all aspects of your financial life including loans, and rentals among others. Therefore, you would prefer to avoid anything that might lead to a decrease in this score. About this issue, there is one typical question that people ask: Does a credit limit increase on any of your credit cards affect credit? Now let’s examine credit line increase requests and what it means for your credit score in more detail.

What to Expect When You Seek an Increase in Your Credit Line An example of a credit line increase is when you apply to your credit card company to have the limit on your current credit card raised. Sometimes, the card issuers will automatically notify you of a higher limit, although you can also ask for an increase yourself. When you do, the card company will do something that is called a ‘soft inquiry’ or ‘soft pull’ on your credit. This verifies some of the details in your credit report but does not pull your credit report altogether.

If the soft pull reveals that you have a good payment history and your financial situation appears to be sound, the card company will auto-approve you for a larger line of credit. They need to provide better customers with more purchasing power today to earn more interest in the future. The higher limit also proves that the company believes that you are capable of handling more of the credit that is available responsibly.

Why Credit Line Increases Often Do Not Affect Your Credit Scores Negatively The good news is that having your credit limit increased does not lower your credit scores when you ask your credit card issuer. The reason behind this is that soft pulls do not reflect on your credit reports and are not considered in most scoring systems. That means even if you got a denial for the increase, that decision itself means nothing bad will happen to your score as well.

You may discover that even the presence of such a higher limit in itself contributes to slight fluctuations in the credit score at first. That’s because the higher total limits for credit utilization can alter your credit utilization ratio for some time until your spending habits adjust. However, score fluctuations are not very significant unless the usage is more than expected and should self-regulate within a few months.

When Credit Line Increase Requests May Harm Scores There are a couple of scenarios where requesting a bigger credit line can negatively impact your scores.

• This is done shortly after opening the card when you apply for an increase. If it is less than 6-12 months, the Account pulled by the credit references may reflect the new account. That could be interpreted as credit risk by the scoring models.
• Your request causes a recon of your entire account. If the soft pull reveals some negative information such as the record of missed payments that you later cleared, the company may change its perception of your creditworthiness. Which could result in them reducing your limit or even canceling the card account altogether.

In both cases described above the changes that decrease the total credit limit or even close the account can contribute to the growth of your credit utilization ratio. However since usage contributes about 30 percent of most credit score assessments, this could most absolutely lead to a decrease in the scores.

How to Minimise Your Score When Applying for an Increase in Credit Line If you want to request a higher limit without the threat of credit score damage, follow these best practices.

• Do not request more credit within the first six months of using a particular credit card. This minimizes the new account appearance risk with request date credit checks.
• Regulation: Minimize balances: pay on time always. Keeping balances low and maintaining a positive payment record tells credit card companies that you can handle more credit.
• Think about requesting that they work automatically with an increase every month or after a specific number of months. This means that you can get additional credit without having to request it, and this is done incrementally.
• Practice account diversity. Because credit lines are spread out over multiple issuers, they are optimistic about not being severely affected if one card shuts down due to recon fallout.

Also, remember that credit scores tend to vary by a few points each month. Therefore, small drops following a credit line upturn, as much as it is irritating, may not be significant enough to be worried about. To do this, go and check your full credit reports instead to find out that certain changes need to be taken care of.

Conclusion More often than not, applying for an additional credit card or a higher credit limit on a current credit card will not damage your credit rating. In so much as your credit profile is healthy enough, soft credit checks from increase requests do not pose much risk. However, if you already have a subprime payment history or utilization rates, having a larger credit line could lead to even deeper score declines. Before applying for credit accounts, review your current credit status and make sure to handle card responsibilities properly in the future. Keeping the balances, as well as keeping credit limits low and having a good overall credit standing is vital for approval and for not suffering negative effects on credit scores from increasing credit limits.

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