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What Is a Credit Limit Increase?
A credit limit is the amount that a card issuer allows you to spend on your account.
But many card holders also like to have higher limits to increase their spending flexibility.
Before you do, however, its important to understand how a credit limit increase impacts your credit score.
Depending on whether or not you carry a balance, a credit limit increase might improve your credit utilization.
So, in this example, a credit line increase wont affect you that much.
When your credit line goes up, however, it does increase your amount of total available credit.
When Does a Credit Limit Increase Help Your Score?
A credit limit increase can increase your score the most if you have high balances on your credit cards.
This is because it could dramatically reduce yourcredit utilization.
For example, imagine that you have a credit limit of $2,000 and a balance of $1,500.
That puts your credit utilization at 67%.
That could end up having the opposite effect on your score.
Can a Credit Limit Increase Hurt Your Score?
Generally speaking, a credit limit increase will not hurt your score.
First, you should avoid triggering a hard inquiry when you request a credit limit increase.
Most times this wont happen, but be sure to read the fine print before you make your request.
Sometimes, a card issuer may require a hard inquiry, but they will tell you beforehand.
The other risk of a higher credit limit to your score is that you will start spending more.
Should You Request a Credit Limit Increase?
There are two primary reasons why you might want to increase your credit limit.
The second is if you have a large purchase coming up and need a higher limit to cover it.
The same would apply to a cash-back credit card.
But there are other, more traditional ways of raising your credit score, as well.
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