Does a credit line increase hurt your credit?

Can Increasing Your Credit Line Hurt Your Credit?

At some point, you may consider increasing your credit limit. Maybe you’re planning a large purchase or want to improve your credit utilization ratio. Before you make the request, though, it’s important to understand the potential impact on your credit score.

The Initial Inquiry

When you apply for a credit limit increase, the lender will typically perform a hard inquiry on your credit report. This can cause a small, temporary decrease in your credit score. The inquiry will stay on your report for two years, but its impact will diminish over time.

Ongoing Use and Payment History

How you use your credit line after the increase will have a significant impact on your credit score. If you use the additional credit responsibly, make timely payments, and keep your utilization ratio low, your score will likely increase. However, if you max out your credit line or make late payments, your score could suffer.

Long-Term Benefits

If you use your increased credit line wisely, it can actually help you improve your credit score over the long term. Here are a few potential benefits:

• Lower credit utilization ratio: Your credit utilization ratio is the percentage of your total available credit that you’re using. Keeping this ratio low is important for your credit score. An increased credit line gives you more room to spend without increasing your utilization ratio.
• More time to pay off debt: If you have a large balance, an increased credit line can give you more time to pay it off. This can help you avoid late payments and improve your credit score.
• Emergency fund: An increased credit line can also serve as an emergency fund in case of unexpected expenses. Having access to extra credit can give you peace of mind and help you avoid taking on high-interest debt.

Conclusion

Increasing your credit line can be a smart move if you use it responsibly. While the initial inquiry may cause a slight dip in your credit score, the long-term benefits can outweigh the short-term blip. Just remember to use the additional credit wisely and make timely payments.