credit report and credit increase

Does Being Rejected for a Credit Increase Affect Your Credit Score?

Generally, getting denied for a credit increase won’t directly affect your credit report or your credit score. However, while the denial itself doesn’t make a difference, the process leading up to it can. Also, by not getting a credit increase, you’re missing out on the benefits of having additional credit.

Inquiries and Credit

When you ask your credit card issuer for a credit increase, the issuer will typically review your credit as a part of its decision-making process. This may create a hard inquiry on your credit report. Generally, these are treated the same way as when you apply for a new credit account, and it can impact your score. Before asking for a credit increase, you may want to ask the credit card issuer what type of inquiry it will make.  This information is helpful and can help you monitor your credit score.

Too Little Credit

One of the ways a rejection can hurt you is if you have too little available credit relative to your balances. Credit scores typically consider a factor called credit utilization. To calculate it, the bureau divides your balances by your credit limits and, the lower it is, the better it usually is for you. For instance, if you have a $1,000 balance and a $2,500 limit, you have 40 percent credit utilization ratio. If you received a $1,500 increase, which would have given you a $4,000 limit, your overall credit utilization would have gone down to 25 percent. Without the credit limit increase, you don’t get the benefit of the reduced utilization.

Applying for a New Card

One way to mimic the impact of a credit limit increase is to get a new credit card. However, this strategy may have two drawbacks. First, getting a new card will require a hard inquiry to be placed on your credit report, since the new issuer will check your credit risk level. Second, adding a new account can lower the average age of accounts on your credit report, which is typically another element of your credit score calculation.

Use Less Credit

While you can lower your credit utilization by increasing your credit limit, you can also attack the other side of the issue. If you have 40 percent utilization due to a $1,000 balance and a $2,500 limit, spending or owing less on your credit card will have the same impact as raising your credit limit. Cutting your credit card balance back to $600 will reduce your utilization to 24 percent and may improve your score.

You may also get the secondary benefit of spending less money on interest and monthly payments. One way to see how spending less affects you is to check your credit score regularly.

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About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2014, Inc.  All rights reserved.