A credit score is the greatest tool in determining the types of rates you will have to pay when borrowing money. Based on your credit score, you can ultimately save thousands of dollars on auto loan, mortgage and credit card rates. It is important to understand the importance of managing your FICO score responsibly and what steps are needed to protect the integrity of your rating. Although there are many things you may do that affects your score directly, not all of your actions will lower your credit limit.
Increasing Credit Limits
If you are interested in increasing your credit limit but are concerned the process may negatively impact your credit score, please note the opposite is true. According to the Fair Isaac Corporation, the developers of the FICO score:
“Credit checks made by businesses to offer you goods or services, or inquiries made by businesses with whom you already have a credit account do not count toward your FICO score. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your FICO score.”
No Impact on Credit Score
Since you are asking an existing credit card company to raise your limit, there should be no impact to your credit score. Additionally, when you successfully manage to raise your credit card limit, you may actually raise your credit score. Your credit utilization ratio, or the amount of money owed in relation to your total credit limit, accounts for 30% of your total FICO credit rating. If you raise your credit limits and do not increase your negative card balance by paying only part of your monthly bill or taking on new debt, you will have a greater proportion of credit to your existing debt. That improved balance ratio will be taken into consideration when recalculating your credit score.
There are types of inquires that will negatively impact your credit score, but the process of applying for an increase in your credit limit through a credit card company that you already have an established history with should not be one of them. To find out more tips about managing your credit wisely, visit the FICO’s Credit Education Center.