A credit line increase boosts the maximum amount of credit you can use on a credit card or other revolving accounts such as a Home Equity Line of Credit (HELOC). This increase might be offered automatically if your lender detects responsible financial behavior or requested by you to enhance your spending power.
How Credit Line Increases Work
Automatic increases occur when lenders periodically review accounts and raise credit limits for customers with good payment history and low balances. These typically involve a soft credit inquiry that does not affect your credit score.
Requested increases are initiated by you, often through your card issuer’s website or app. When you request an increase, lenders may perform a hard credit inquiry, which can temporarily lower your credit score by a few points. Always ask your issuer if a hard or soft inquiry will be used before submitting your request.
Why Increase Your Credit Limit?
The primary advantage of a credit line increase is a lower credit utilization ratio — the percentage of available credit you’re using. This ratio accounts for about 30% of your FICO® credit score (Credit Utilization Ratio). For example, if your balance is $1,000 on a $2,000 credit limit, your utilization is 50%. Increasing your credit limit to $4,000 cuts that utilization to 25%, which can improve your credit score without changing your spending.
Pros and Cons
| Pros | Cons |
|---|---|
| Lowers credit utilization, potentially boosting your credit score | Risk of overspending leading to more debt |
| Increases purchasing power for larger expenses | Request may trigger a hard credit inquiry, slightly dipping your score temporarily |
| Provides a financial cushion in emergencies | Some requests may be denied, which can be discouraging |
| Signals lenders you are a responsible borrower | Larger balances could lead to higher interest costs if not paid off promptly |
Tips to Improve Approval Chances
- Maintain a solid payment history and low credit balances.
- Request increases after at least six months of card use, preferably after income gains or credit score improvements.
- Ask for a moderate increase (10-25% of your current limit) rather than a large jump.
FAQs
What if my request is denied? You’ll receive an adverse action notice explaining the reasons, such as high balance or low credit score. Address these issues before reapplying in six months.
Will a credit line increase hurt my credit? A hard credit inquiry can cause a minor, temporary dip, but the benefit of reduced utilization usually outweighs this.
Should I accept automatic increases? Generally, yes, unless you fear increased temptation to overspend.
For more details on topics related to your credit and financial health, see our articles on Credit Utilization Ratio, Hard Credit Check, and Soft Credit Check.