Does Increasing Credit Limit Affect Credit Score?

A credit limit is assigned to each borrower when they get a new credit card. This limit depends on the borrower's behavior until that point and is subject to many changes over time based on several factors. 

In this article, we will explore the effect of credit limit on credit score and the factors that influence the limit. 

How Can I Increase My Credit Limit?

Banks and other lenders generally offer to increase the credit limit of individuals with good credit history and a track record of timely repayments. This increase in credit limit gives borrowers the ability to spend more and make big-ticket purchases in one go. 

Another way to increase your credit limit is by placing a request to your lender. The lender will conduct a hard inquiry to understand your profile as a borrower and check if you are eligible for a credit limit increase. 

If the lender finds you eligible, they will approve your request and increase your limit based on your credit behavior.

Which Factors Influence Credit Limit Increase?

A higher credit limit is healthy for your credit score. The following factors impact your chances of a credit limit increase. 

• An updated financial and personal profile allows the credit card company to easily access your information for a limit increase. Hence, keep your information up to date.
• Ensure the information on your credit report is accurate and free of any errors. A small discrepancy or misinformation can cause you to lose valuable credit points and in turn, a credit limit increase.
• A lower credit utilization ratio reflects well on your borrower behavior as it portrays you as a responsible spender. Keep the ratio less than or equal to 30% of your credit limit always.
• The most important aspect is timely repayments. A single late payment can reduce your chances of increasing your credit limit drastically. Therefore, pay your credit dues on time.

Can The Lender Decrease My Credit Limit?

The lender has the authority to increase your credit limit. In like manner, the opposite is also possible. 

If the lender finds you careless with your credit and unreliable with your repayments, they have the right to decrease your limit. It can also happen if you seldom or never use your credit card. 

This move will increase your credit utilization ratio and lower your credit score. 

The credit limit depends on various factors, one of which is the credit score. In the same way, an increase or decrease in credit limit impacts the credit score accordingly. Some lenders consider your repayment patterns, consumer behavior and offer a credit limit increase. As a regular credit card user, you can also request an increase.