Does Increasing Credit Card Limit Affect Credit Score?

The credit limit impact on credit score depends on your spending habits and repayment behaviour. One of the key parameters credit bureaus consider is your credit utilisation ratio—the percentage of available credit that you actually use.

For example, if your total credit limit is ₹1 Lakh and you spend ₹30,000. Your credit utilisation ratio is 30% in this case. Now if your credit limit is increased to ₹2 Lakh and you continue to maintain the same spend of ₹30,000, the utilisation ratio drops to 15%. This implies responsible credit usage and helps raise your score.

However, if your utilisation goes up significantly with your credit limit increase, it portrays you as a credit-hungry individual. If the spends are above the recommended limit, it will impact your score negatively.

Another frequently asked question is: “Does asking to increase credit limit affect credit score?”  When you request a credit limit increase, lenders generally review your credit report. This inquiry (also known as a hard check) may cause a small and temporary drop in your credit score. However, consistent repayment history and low credit utilisation helps get it back on track.

If you are looking to raise your credit limit, here are a few ways to do it:

• Automatic upgrades: Banks often increase your credit limit automatically if you have a good repayment record.

• Request your bank: You can submit a formal request through your bank’s website, mobile app, or customer care centre to increase your credit limit.

• Update details for higher income: Providing updated income documents with higher income often improves your chances for a higher limit.

• Build a strong credit history: Regular usage with timely payments increases your chances of approval.

When deciding whether to raise your credit limit, lenders consider multiple factors:

• Credit score: A higher score implies reliability and financial stability.

• Repayment record: Late or missed payments reduce approval chances.

• Debt-to-income ratio: Lower debt compared to income increases eligibility.

• Length of credit history: A longer, well-maintained account is seen as lower risk.

• Current usage pattern: Moderate use with full repayments shows responsible behaviour.

• Lowers your credit utilisation ratio.

• Builds a stronger credit profile over time.

• Gives more financial flexibility for larger or emergency expenses.

• Can improve eligibility for future loans with higher limits.

• May encourage overspending if not managed carefully.

• A hard inquiry from the lender can cause a temporary drop in score.

• Missed payments on higher balances have a stronger negative impact.

• Repeated requests for limit hikes can appear risky to lenders.

So does a credit limit increase affect credit score? A credit limit increase can strengthen your financial profile if handled wisely. Keeping your utilisation low, making full and timely repayments, and avoiding unnecessary spending are the key to maintaining a healthy credit score. While a credit limit increase might cause a minor short-term dip, its long-term effect is positive when used with discipline.

If you are planning to apply for new credit, comparing card options through platforms like Bajaj Markets can help you choose cards with flexible limits and responsible usage tools.