Does requesting a credit limit increase affect your credit score?
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To increase your credit limit, simply call customer service or submit a request through your issuer’s mobile app. While increasing your credit limit may make it easier for you to pay off your next big purchase or improve your credit score, consumers should be aware that it may actually impact your credit score.
Select spoke with Ted Rossman, Senior Credit Card Industry Analyst at Bankrate, and Matt Schulz, Chief Credit Analyst at LendingTree, to learn more about how your credit score could be affected by a request for a higher credit limit.
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Is it a hard inquiry or a soft inquiry?
Depending on the card issuer, applying for a higher credit limit may result in a full inquiry, a non-binding inquiry, or both types of credit checks on your credit file, Rossman says.
A Serious investigation occurs when a lender pulls your credit report – this action usually causes your credit score to drop by between five and 10 points. Note that while a serious inquiry will only affect your credit score for up to one year, it will remain on your credit report for two years.
In contrast, a soft credit check has no effect on your credit score. For example, Capital One would not thoroughly investigate if a cardholder requested a credit limit increase for one of their Capital One credit cards.
Keep in mind that most card issuers do not publicly reveal what type of credit check they will perform on consumers requesting a higher credit limit, so you will need to call ahead and ask to be sure. .
You can quickly request a credit limit increase for Citi credit cards, like the Citi® Double Cash Card, through the bank’s app with just a few clicks. And reports say that Citibank will almost always only use a soft pull when making this request, but if you want a higher credit limit than what Citi is initially offering you, then they will do a hard pull. Citi also offers automatic credit limit increases that do not result in a hard draw.
Citi® Dual Charge Card
2% Cash Back: 1% on all qualifying purchases and an additional 1% after you pay your credit card bill
0% for the first 18 months on balance transfers; N/A for purchases
14.24% – 24.24% variable on purchases and balance transfers
Balance Transfer Fee
For balance transfers made within 4 months of account opening, an initial balance transfer fee of 3% of each transfer ($5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies
Foreign transaction fees
Raising your credit limit could improve your credit score in the long run
Schulz notes that you shouldn’t worry too much if your card issuer does a thorough investigation of your credit report, because the slight drop in your credit score is only temporary. The benefits of applying for and receiving a higher credit limit often outweigh the negative effects of investigating your credit report, says Schulz.
When you increase your credit limit, you can also improve your credit utilization rate, which can improve your credit score in the long run. There are five factors that make up your FICO credit score: your payment history (35%), amount owed (30%), length of your credit history (15%), your credit mix (10%) and the new credit (ten%).
The Amounts Due category (30%) also considers five factors, including how much you owe across all your accounts, how much you owe based on the different types of accounts you have, the value of your current balances, the amount you owe on your installment loans and your credit utilization rate.
Therefore, experts say the credit utilization ratio comprises 30% of your FICO score since it only applies to revolving lines of credit and is defined as the ratio of the credit you are using to the total amount. credit granted to you.
For example, if you owe $2,000 on a credit card with a $10,000 limit, that means you have a 20% utilization rate on that card. The total credit utilization rate would be based on the total amount of revolving credit granted to you and the total amount you have used.
While experts generally recommend people keep their credit utilization rate below 30%, anything below 10% is even better.
Credit utilization is the second most important factor in the FICO scoring formula after your payment history, so improving your credit utilization rate can end up having a positive impact on your credit history, explains Schulz.
All three credit bureaus – Equifax, Experian and TransUnion – are currently offering free weekly credit reports due to the ongoing COVID-19 pandemic through annualcreditreports.com. Getting into the habit of checking your credit report can also make it easier to detect incidents of fraud. Credit monitoring services such as CreditWise®, Experian Free Credit Monitoring, and IdentityForce® UltraSecure can also be used to detect errors on your credit file – if someone applied for a line of credit in your name, for example. .
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At the end of the line
Whether your credit card issuer performs a hard or soft credit check (or both), when you request a higher credit limit, the impact of these requests on your credit score is generally negligible in the long run. . Instead, cardholders should focus more on Why they ask for a higher credit limit – you don’t want to use the increased credit to fund a lifestyle you can’t afford, but remember that increasing your credit limit can help fund major expenses and can increase your credit score by lowering your rate of credit utilization.
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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.