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Highlights:
Whether a credit limit increase affects credit scores depends on your debt to credit utilization rate
You can ask for a credit limit increase on an existing credit card
A credit card company may also increase your limit without a request from you
One of the many questions we receive at Equifax involves credit limit increases. Specifically, consumers want to understand more about requesting a credit limit increase, or when they might receive one from a credit card company.
“One of the many things to consider with a credit limit increase is understanding your own mindset when it comes to credit,” said Zehra Mehdi-Barlas, director of public relations for Equifax Global Consumer Solutions. “If you’re viewing a credit limit increase as an opportunity to spend more without a plan to continue to pay off the debt responsibly, a credit limit increase may not make sense.”
Will a credit limit increase affect credit scores? It all comes down to something called your debt to credit utilization rate. That’s the amount of credit you’re using compared to the amount of credit available to you. Generally, this is one of the factors that impacts credit scores, and creditors prefer to see a lower ratio of how much debt you have compared with how much available credit you have. Why? Remember: Before extending credit, lenders want to know that you can responsibly manage the debt you do have – and that you aren’t overextending yourself, financially.
How to get a credit limit increase
There are two ways to get a credit limit increase. One is asking for a credit limit increase on an existing credit card – usually one you’ve had for at least a few months.
When you make this request, the credit card company may review one or more of your credit reports as part of their evaluation. Whether this is a “soft inquiry,” which does not impact credit scores, or a “hard inquiry,” which may impact credit scores, varies based on the creditor's policies. If you’re considering a credit limit increase request, consider checking with the credit card company to learn more about their policy.
The creditor may also request proof of your annual income, employment status, and monthly rent or mortgage payments when reviewing your request.
You might also consider checking your own credit reports before making the request to ensure there’s no information that might increase your chances of getting turned down for the credit limit increase. If you find any information on your credit reports you believe is inaccurate or incomplete, you can dispute that information with the company that reported it or file a dispute with the credit bureau providing the credit report. At Equifax, you can create a myEquifax account to file a dispute. Visit our dispute page to learn other ways you can file a dispute with Equifax.
The second way you may get a credit limit increase is if a credit card company increases your limit without a request from you. This typically occurs after you’ve demonstrated responsible credit habits such as making on-time payments and paying more than the minimum payment required.
Whether a credit limit increase stems from your request or the creditor's decision, “what’s most important is evaluating your own personal situation and understanding whether you can continue to handle credit responsibly," Mehdi-Barlas said.
Let’s Learn About: How a Credit Limit Increase May Affect Your Credit Score
Increasing your credit limit may help your credit score if you keep your credit utilization low
If your lender does a hard inquiry to approve your credit score increase, your score may go down
An increase in income can make you eligible for a credit limit increase
Your credit limit is the maximum balance you can have on your credit card. Increasing your credit limit could help your credit score, leave it unchanged, or lower your score, depending on the circumstances.
Find out what factors could cause you to hurt your credit score, and when it’s the right time to ask for a credit limit increase.
How can increasing your credit limit affect your credit score?
All things being equal, increasing your credit limit will reduce your credit utilization ratio. The credit utilization ratio is the amount you owe as a percentage of your credit limit. A low credit utilization ratio may help your credit score more than a high ratio.
If you increase your credit limit, your spending habits remain about the same, and you continue to make on-time monthly payments, your utilization ratio would go down, and this could impact your credit score.
However, if you increase your spending too much after increasing your credit limit, your credit utilization ratio will increase, and that may negatively impact your credit score.
For example, if you have a $1,000 credit limit and spend $500 before you pay the bill, that’s a 50 percent credit utilization ratio. But if you get a credit limit increase to $2,000 and then spend $1,500 before you pay the bill, your credit utilization ratio will go up to 75 percent.
The Consumer Financial Protection Bureau recommends keeping your credit utilization ratio under 30 percent.
Your credit score may also be affected by a credit limit increase because of a hard inquiry. When a lender obtains a copy of your credit report to decide whether to grant your request for additional credit, this results in a hard inquiry on your credit report. Hard inquiries usually do not have a significant impact on your credit score unless many occur in a short period of time.
When to ask for a credit limit increase
Asking for a credit limit increase at the right time could affect your chances of being approved. Consider these things before requesting a credit limit increase.
- You Received a Raise: Reporting an income increase could show credit card issuers you have the ability to handle more debt.
- You Make On-Time Payments: Credit card issuers take into account how reliably you make payments on all of your loans.
- You Have a Low Credit Utilization Ratio: Using only a small percentage of your available credit shows that you can handle credit responsibly.
- Your Credit Score Is Good to Excellent: Credit card issuers are more likely to issue additional credit if you have handled your existing credit well.
You can request a credit limit increase on your Discover Card by logging into the Discover Account Center, selecting “Card Services” and then “Credit Line Increase.” Or on your Discover Mobile App, select “Services” and then “Credit Line Increase.”
You can also request a credit line increase by calling the phone number on the back of your Discover card.
What you should consider before requesting a credit limit increase
- You Applied for a New Line of Credit: Applying for a new line of credit and requesting a credit limit increase can both result in a hard inquiry. Multiple hard inquiries may negatively impact your credit score and potentially show financial hardship.
- Your Income Has Decreased: If you recently transitioned to a lower-paying job, it could affect being approved for a credit limit increase.
- Your Credit Isn’t Good: If your credit isn’t good, it may be best to work on improving your credit score before requesting a credit limit increase.
Automatic credit limit increases
Requesting a credit limit increase isn’t the only way to get one. If you have used your credit card responsibly and have made on-time payments, your credit card issuer may automatically increase your credit limit.