Does a Credit Line Increase Affect Your Credit Score?

A credit score is a numerical representation, typically ranging from 300 to 850, that assesses an individual’s creditworthiness. Lenders use this number to gauge the likelihood of a borrower repaying debts on time. A higher credit score generally indicates lower risk to lenders and can lead to more favorable loan terms and interest rates. Understanding how financial activities influence this score is important.

The Direct Effect on Your Credit Score

A credit line increase can influence your credit score in both positive and negative ways. When you request a higher credit limit, there might be a temporary, minor dip in your score due to a “hard inquiry” on your credit report.

The long-term effect of a credit limit increase often depends on how it changes your “credit utilization ratio.” If your spending habits remain consistent after receiving a higher limit, your credit utilization will likely decrease, which can positively impact your score. Conversely, if increased credit availability leads to increased spending and higher balances, it could negatively affect your score. Lenders may also automatically increase your limit based on responsible payment history, which typically involves a “soft inquiry” and no negative score impact.

Credit Utilization’s Role

Credit utilization is a significant factor in credit scoring models, often accounting for 20% to 30% of your credit score. This ratio is calculated by dividing the total amount of credit you are currently using by your total available credit, expressed as a percentage. For example, if you have $500 in balances on credit cards with a combined limit of $2,000, your utilization is 25%.

A lower credit utilization ratio generally benefits your credit score, as it signals to lenders that you are not overly reliant on borrowed funds and are managing your debts responsibly. Many experts suggest keeping your overall credit utilization below 30%, though a lower percentage, such as under 10%, is often associated with excellent credit scores. When a credit limit increases without a corresponding rise in balances, your utilization ratio decreases, which can improve your credit score.

Hard Inquiries and Credit Scores

A hard inquiry, also known as a “hard pull” or “hard credit check,” occurs when a lender reviews your credit report to make a lending decision, such as when you apply for new credit or request a credit line increase. This type of inquiry can result in a temporary, minor decrease in your credit score, typically by five points or less, though some sources suggest up to 10 points. It often fades within a few months, generally affecting your score for up to 12 months, although the inquiry itself can remain on your credit report for up to two years.

In contrast, a “soft inquiry” does not affect your credit score. Soft inquiries may occur when you check your own credit score, when a company pre-qualifies you for an offer, or when a lender automatically reviews your account for a potential credit limit increase. While multiple hard inquiries in a short period could signal higher risk to lenders and potentially have a greater negative effect, inquiries for specific loan types like mortgages or auto loans within a short window are often treated as a single inquiry by scoring models.