Does Requesting Credit Increase Affect Credit Score?

Most credit card companies provide their clients with the privilege of applying for increased credit limits. A higher limit can mean that this is done with more purchasing power and greater freedom to utilize the card. However, some individuals believe that applying for an increase in the credit limit might affect their credit score negatively. Hence, does this lead to a credit check when one is applying for a higher credit limit?

The short and sweet is no, applying for a credit limit increase does generally not damage your credit score. Provided that the cardholder uses the high credit limit wisely and delays making payments then requesting more credit will not hurt your credit score. Here is the breakdown of how credit limit increase requests function and when they can affect your credit rating.

How Credit Limit Increase Request Process?

Should you be looking for a credit limit increase for your credit card, the credit card provider does a mild credit check. When it comes to credit score models like FICO or Vantage Score, soft inquiries are not handled the same way as hard inquiries.

Hard inquiries are the result of a credit history check made by a credit reporting agency upon lender request. Every time you apply, you cause a hard inquiry that somewhat reduces your score by a few points. As they are considered soft inquiries, requests like a credit limit raise do not call for an application or thorough screening process. Soft inquiries do not affect credit ratings, therefore.

The card issuer will take into account your spending and payment habits, credit score, income, and existing credit limitations when deciding on a new credit limit. As long as you have been a conscientious credit user in the past, the issuer poses little risk to deserve the larger limit. When it comes to the credit limit to be offered to a borrower, every lender does, however, follow different policies.

You will be exposed to a rigorous search, nevertheless, instead of asking for a credit limit increase you apply for another credit card with a greater credit limit. Still, many hard queries might damage your credit score more than anything else. Still, a request for a credit limit increase on current accounts is not regarded as a credit application.

When a Credit Limit Increase Request Might Harm Your Credit Score?

Just requesting the credit limit to be increased or having an inquiry should not affect your credit score negatively. However, there are a couple of scenarios where a higher credit limit could negatively impact your credit score indirectly.

1. If the increased limit makes you spend beyond your financial capabilities your credit card balances go over 30% or reach the maximum limit. Your credit utilization rate, the amount of credit you use about your total credit limit, accounts for a good portion of a FICO or VantageScore. One can end up with an extremely high utilization figure when cards are maxed out.
2. If lenders consider the higher limit as elevated credit risk and opt to take other actions that affect your credit report. For instance, some issuers may reduce your credit limit back down to, or even cancel the credit card account, or in the worst-case scenario, write off your account as a bad debt. Yet these actions that directly reduce your score occur more often as a result of a missed payment or an over-the-limit charge as opposed to a regular credit limit increase request.

Ways You Can Ask for an Increased Credit Limit Without Compromising Your Credit Rating

If you have plans to request a higher credit card limit, here are some tips to do it without damaging your credit.

• Examine your credit reports and credit scores initially to assess your strengths and weaknesses and eliminate any misconceptions. This also illustrates the fact that you can estimate roughly how much of the limit increase you can expect.
• Do not request a very high amount of money rather you are likely to be deemed as greedy, just ask for an increase and be specific, for instance, go for a moderate increase instead of a double or tripling of your limit. The general advice is that the new limit cannot be higher than two times the current limit.
• Do not ask for another increase for at least 6 months. Allow the issuers some time to note how you conduct yourself with the higher limit before requesting one again.
• Do not apply for other credit cards before applying for the credit as this will be construed as the highest risk. Do not apply for new credit carelessly.
• Ensure that you balance all your credit card bills in full before applying for an increase to demonstrate responsibility.
• If your total credit limit across all these cards is very high compared to your income, it might be wise to ask for credit line reductions on other cards.

However, if your credit history indicates that you have been a good credit user and you can repay the higher amount, a small credit limit increase request should not harm your score. It is also advisable to pay attention to your TransUnion, Equifax, and Experian credit reports to make sure that the inquiry is recorded accurately. A higher limit helps to practice better credit habits and does not necessarily hurt your credit score.

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