Will Increasing Your Credit Limit Hurt Your Credit Score?

If you have a credit card, you may be wondering about increasing your credit limit to be able to make larger purchases while keeping your credit utilization low. So, does increasing your credit limit hurt your credit score? We will answer this question in much detail below.

Will Increasing Your Credit Limit Hurt Your Credit Score?

If you request a credit limit increase, you will likely hurt your credit score slightly because most credit card issuer will request to review a copy of your credit report when deciding whether to approve your request for a credit line increase. Whenever a card issuer asks for a copy of your credit report, a hard inquiry is placed on your credit report. Hard inquiries can lower your credit score by 5 to 10 points. However, such a small drop in your credit score should not worry you because your credit score will recover within a short period of time.

That said, not all card issuers request to review a copy of your credit report. Bank of America and Chase will request a copy of your credit report whenever you ask for a credit line increase, however, Capital One, for example, does not make such a request so asking for a credit line increase will not hurt your credit score.

So, if you’re worried about having a hard inquiry placed on your credit report, you should ask your credit card issuer if they will place a hard inquiry on your credit report before applying for a credit line increase.

Automatic Credit Limit Increase

Now that we’ve discussed what happens when you yourself request a credit line increase, let’s dive into what happens when your credit limit is automatically increased.

Most credit card issuer monitor your credit report, your spending habbits, whether you repay on time, and how much of your available credit you’re using. Oftentimes, card issuers will increase your credit limit without you having to ask for a credit line increase.

Typically, when a card issuer increases your credit limit without you requesting a credit line increase, a hard inquiry is not placed on your credit report, therefore, the credit limit increase will not hurt your credit score.

How Does a Credit Limit Increase Affect Your Credit Score?

Although applying for a credit line increase can cause a small drop in your credit score because of the hard inquiry that’s placed on your credit report, your credit score can quickly recover, especially if you don’t rack up new debt.

When you increase your credit limit, you are decreasing your credit utilization (increasing available credit), which accounts for 30% of your credit score. The lower your credit utilization, the better your credit score will be.

As a rule of thumb, your credit utilization should never exceed 30%. Ideally you’d want to keep your credit utilization between 5% and 10% to improve your credit score.

If your credit limit increase request is approved, you will improve your credit score because it decreases your credit utilization since your available credit increases. However, if you rack up debt after increasing your credit limit, you could cause your credit score to drop.

How is your credit utilization calculated?

Your credit utilization is calculated by adding up the balances on all of your credit cards, and dividing them by the total amount of credit limits that you have.

For example, if you have 2 credit cards, one with $1000 balance and a second with $500 balance, you would add the two up and divide them by your total credit limits. One of your cards has a $4000 credit limit and the second one has a $6000 limit, your total credit limit would be $10,000.

Divide your total balances by your total credit limits: $1,500 divided by $10,000. This would give you a 15% credit utilization. 15% credit utilization places you in the safe zone since you’re under the recommended maximum of 30%.

How to Increase Your Credit Limit?

Oftentimes, your credit limit will be increased automatically. If your card issuer sees that you’re using your credit card responsibly by spending and making your payments on time, your card issuer might increase your credit limit automatically without you having to ask for an increase.

Typically, if you use your card for 6 months to 12 months, and you make your payments on time, your card issuer may increase your credit limit. However, if your credit limit has not been increased automatically, you can ask for a manual credit increase. Usually, most major card issuers allow cardholders to request a credit line increase online through the cardholder’s online banking portal.

Usually, a credit limit increase request is done by logging in online, requesting a credit limit increase, and providing basic information, such as your citizenship status, income, and amount of rent that you pay. Your request will then either be automatically approved or sent to an agent for manual review.

Bank of America Credit Limit Increase

If you want to request a credit line increase for a Bank of America Credit Card, you will be able to do so online. If you’re eligible for a credit line increase, a credit limit increase link will appear when you’re logged in and on your account page. You can click the button to request a credit line increase. Your request will either be automatically approved or it may require a manual review, meaning an agent of the card issuer will look over your financials to determine whether to approve your credit limit increase. That said, if you’re old school, you can contact Bank of America via phone and ask them for a credit line increase. The same process will ensue.

Chase Credit Limit Increase

Unfortunately, the quickest way to request a credit limit increase for your Chase credit card is to call them and ask them for a credit line increase. Trying to increase your chase credit card limit online is not easy, there is no button that allows you to quickly as for a credit line increase. To increase your credit online, you have to send chase a secured message with basic information, such as your name, income and requested credit limit. Typically, Chase will reply within 24 hours telling you whether they’ve approved or denied the request. They will either approve or deny your request.

Capital One Credit Limit Increase

Capital One allows you to request a credit limit increase online. Like Bank of America, you will fill out information, such as your income, monthly rent payment, employment status, and the credit limit that you want. Capital One will then either instantly approve your request or it may take a few days to complete a manual review that includes checking your credit report and eligibility for a credit line increase.

Discover Credit Limit Increase

Discover allows cardholders to request a credit limit increase from their online banking portal. You will enter the required information, such as your annual income, monthly rent or mortgage payment, desired credit limit, and the name of your employer, and you will be able to request a credit limit increase. Alternatively, you can call Discover and ask for a credit line increase by phone.

How Can You Successfully Increase Your Credit Limit?

Here are some tips that will help you successfully increase your credit limit:

  • Make your credit card payments on time
  • Pay more than the minimum payment
  • Keep your credit card balance low
  • Avoid having negative marks from being added to your credit report
  • Keep your information updated with your credit card issuer
  • Monitor your credit and dispute any inaccurate information that may appear on your credit report

Can a Card Issuer Reduce Your Credit Limit?

Just as a credit card issuer can increase your credit limit, they can just as easily decrease it. If you’ve missed a payment on your credit card or your credit utilization has significantly increased on your current account or other accounts, your card issuer may decrease your credit limit. Card issuers do this to limit the risk they’re taking by offering you the current credit limit that you have. Also, if you have a high credit limit and you’re barely using any of your available credit limit, the credit card issuer may reduce your credit limit. As such, you should know that if you misuse or don’t use your credit card, the card issuer may, in some circumstances, actually reduce your credit limit.

Credit Score Planet Frequently Asked Questions

1. Should I increase my credit limit?

If you have a low credit limit and you’re often using 30% or more of your available credit, you should increase your credit limit. This will improve your credit score because keeping your credit utilization below 30% is recommended to improve your credit score.

2. Does requesting a credit limit increase affect my credit score?

Requesting a credit limit increase may affect your credit score negatively for a short period of time because a hard inquiry is added to your credit report. Hard inquiries can cause a small drop in your credit score. That said, if your credit limit increase request is approved, your credit score may improve within a short period of time because you’ll be utilizing less of your available credit, which can help your credit score.

3. Why was my credit limit automatically increased?

Credit card issuer periodically review your credit card account and credit report, and if you have been using your credit card responsibly and making your payments on time, the card issuer may automatically raise your credit limit.

4. How long does a credit limit increase take?

A credit limit increase can be instant, however, sometimes a manual review needs to be performed, causing the credit limit request to take takes 3 to 5 days, but in some circumstances can take up to 30 days to process.