Are you interested in asking for a credit limit increase, but worried about the effects it may have on your credit? You’re not alone, and this is an important question to ask.
Good credit is more important than ever before, and it is critical to remain mindful about decisions that could impact your score.
We’ll explain everything you need to know about credit limit increases, and how asking they affect your credit score. Plus, you’ll learn some actionable tips to prepare your finances before you ask your creditor for an increase.
The moment a credit card application is approved, a limit is set for that line of credit. However, making responsible decisions with this credit line, like paying it on time and staying below the credit limit, can affect your eligibility for a credit limit increase.
Depending on the creditor in question, the guidelines for eligibility are vastly different. For most people, there are two main ways to secure a credit limit increase: wait for the creditor to offer one to you or reach out and ask for it yourself.
As mentioned above, a creditor could offer to increase your credit limit without a request from you. This is usually done after a regular review and acts almost like a pat on the back for you being a responsible cardholder.
Sometimes, it isn’t even an “offer” at all but instead acts as an automatic “boost” to your account. This action, in itself, does not affect your credit score at all. In fact, if you continue acting responsibly and paying your card off on time, the higher credit limit could even lower your overall credit utilization ratio.
But, what if your creditor doesn’t reach out? Borrowers are welcome to request a credit limit increase anytime. Before doing this, you should always take the time to review your creditor’s policies. Some lenders enforce a minimum amount of waiting time before you can request an increase in your credit limit.
Another reason to check the fine print is to see whether your creditor will do a “hard inquiry” before they respond to your request. A hard inquiry occurs when someone views your full credit report, and it can actually lower your credit score by a few points.
When determining whether or not you should ask for a credit limit increase, it’s important to review your motives for wanting one.
If you have a history of using your card responsibly by paying your balance off each month, using a credit limit increase to lower your credit utilization ratio and raise your credit score could be quite beneficial for you.
Instead, if you’re asking for more so that you can spend more, it might be worth reevaluating your approach. Getting approved for a higher line of credit increases your chances of falling further into debt, leading to more costly monthly payments and higher interest rates.
Remember, regardless of your credit limit, using your credit card strategically rather than as a budgeting solution will help you improve your score.
Learn more: How to Get a Credit Limit Increase
Want to build credit without the risks associated with a credit limit increase? Try a credit builder with no interest charges, no increased debt, and no credit inquiries.
The StellarFi app allows you to build credit with the bills you already pay, like your rent, utilities and even streaming services. Just sign up, link your bills, and manage them in one convenient dashboard.
As your bills are paid, Stellar reports them to all three credit bureaus (Experian®, TransUnion®, and Equifax®) as on-time monthly payments. Plus, using StellarFi positively influences your credit utilization ratio without the temptation to overspend.
Curious how it works? Sign up and start building credit today.
The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.