Does a Credit Limit Increase Affect Your Credit Score?

Increasing your credit limit (the maximum amount you can spend on that account) can have benefits, from helping you make bigger purchases to providing more financial flexibility. However, you may be wondering if that will impact your credit score.  

In short, yes, it can impact your score. So it’s important to understand the factors that can shape that impact. 

Let’s explore credit limit increases, how they could affect your financial health, what to consider before requesting them and alternative options.

What is a credit limit increase?

A credit limit increase raises the maximum amount of money your credit card issuer allows you to charge to your credit card. It can provide additional purchasing power and potentially improve your credit score. People may request a credit limit increase when:  

• Preparing for large expenses, like home improvements or travel    
• Seeking more flexibility for emergencies    
• Wanting to reduce their credit utilization ratio (the amount of credit they’re using)   

While a higher limit offers benefits, it’s important to weigh the potential impacts before moving forward.  

How a credit limit increase can impact your credit score

A credit limit increase can impact your creditworthiness in several ways, depending on how the process is handled and how you manage your account afterward.

Hard inquiries

When you request a credit limit increase, your card issuer may check your credit report to evaluate your financial health. That may involve a hard inquiry (sometimes called a hard credit check), which can have a small, temporary impact on your credit score.

Credit utilization ratio

Your credit utilization ratio is a key credit score factor, and a lower utilization ratio is typically preferable. Raising your credit limit can help lower this ratio if your spending stays the same. For example, if you have $5,000 in total available credit and you spend $1,000, your utilization ratio is 20%. If your available credit increased to $10,000 while your spending habits remained the same, your ratio would drop to 10%, helping improve your credit score.

Things to consider before requesting a credit limit increase

Before requesting a credit limit increase, keep your financial habits, future credit activity and issuer policies in mind. 

Your financial habits

Higher credit limits can mean more financial flexibility, but they can also come with a higher risk of overspending. It’s important to assess your financial habits to ensure you’ll be able to manage those higher limits well and avoid credit card debt.

Future credit activity

If you’re planning to apply for new credit (especially major credit, such as a mortgage), you may want to consider the timing of your credit limit increase request. A request can trigger a hard credit inquiry that will stay on your credit report for 2 years, though the impact on your credit score may be limited to 1 year.  

In general, more hard credit inquiries may be a red flag for lenders, as it can look like you’re taking on a lot of new debt. You may want to put off requesting a credit limit increase until you’ve completed the application process for new credit.

Issuer policies

Your issuer may review your account and offer increases automatically. Otherwise, you typically need to submit a formal request, which may involve a hard inquiry. They may also require that your account be open for a certain amount of time before considering an increase. 

How to request a credit limit increase

• Review your credit history: Ensure your credit report is accurate and free from errors. Responsible credit usage can help your chances of approval.  
• Request the increase: Some issuers allow you to request an increase online or through their app. In some cases, you may have to call your issuer.  
• Provide information, if requested: Be prepared to share details like your updated income and employment status to help your issuer assess your eligibility. They may also consider your existing expenses and recent credit applications.

Alternatives to requesting a credit limit increase

If you decide not to request a limit increase, there are other ways to manage your available credit effectively.

Open a new credit card

If your goal is to increase your purchasing power and lower your credit utilization, adding a new credit card to your financial toolkit can make sense. Just keep in mind that it will typically involve a hard inquiry and require careful management to avoid accumulating debt.

Improve your credit utilization ratio

Another way to lower your credit utilization is to focus on paying down existing balances. This can positively impact your credit profile without requesting a higher limit, which may help open the door to other credit in the future.  

A credit limit increase can offer more flexibility and positively impact your credit if used responsibly. However, it’s essential to understand how the process works and evaluate your financial habits before requesting one.  

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.