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Does Requesting a Credit Line Increase With Your Creditor Hurt Your Score? The Short Answer: It Depends
Does requesting a credit line increase hurt your credit score?
If your creditor does a hard pull on your credit, well then yes, the credit line increase request will temporarily hurt your credit score a few score points (usually anywhere from 5 to 15 points).
If your creditor does a soft pull, then no, the credit line increase will not hurt your score. And if you’re lucky enough to get the credit line increase, it will actually help your credit score!
All right calm down! It can be confusing but it’s really very easy to explain!
Let’s dive into the details a little deeper to help you to understand.
The first thing we need to discuss is the difference between a hard pull and a soft pull
OK, you are asking for a credit line increase to help your current balance to credit limit utilization ratio. Or maybe you just need more credit available to you to use for a purchase.
When you request an increase, the creditors and banks will want to check your credit history to gauge your credit trustworthiness. To do this they will need to pull your credit history with one of the three major credit bureaus.
When the creditor contacts one of the three major credit bureaus and asks to see the file on your credit history, it is called a credit pull (or a credit inquiry).
Anytime you look (yourself) or your credit or a creditor looks at your credit file it is called a credit pull (or a credit inquiry).
But will it be a hard pull or a soft pull?
A credit pull will either be a hard pull or a soft pull and it will either count against you or it won’t.
What makes this a little bit difficult to understand is that sometimes when somebody looks at your credit or does a credit pull it will either count against you that somebody actually pulled your credit report and sometimes when somebody pulls your credit or does a soft credit inquiry it will not count against you.
A hard pull
When a lender or creditor makes a hard pull it officially shows up on your credit report. All other creditors and lenders can see that you have applied for credit. It is officially notated on your credit report for 2 years. If you’ve only done one recent hard pull, it usually won’t affect your credit score too much. Perhaps only a couple of points.
A soft pull
A soft pull is when either you or your creditor pull your credit report but the pull does not officially show up on your credit report. And anybody looking at your credit report will not see it.
For the most part, you can pull all of your own credit reports as many times as you want and it will not count as someone actually pulling your credit report. They will all be soft pulls.
When the credit agencies pull your score on their own without your knowledge, it would also be a soft pull.
A soft pull does not have a derogatory effect on your credit score. The reason a creditor or lender may pull your credit report without your knowledge is that you may be an existing customer and they may want to sell you another product.
Or if you’ve been a responsible customer, they may want to reward you with a credit line increase, so they will do a soft pull to your credit to make sure that you’ve been responsible in the recent weeks before they make you the offer.
So essentially they take a sneak peek at your credit score (sort of behind your back without you knowing) just to see if you are eligible in trustworthiness to whatever they’re planning on marketing to you.
But if you contact your creditor by phone or apply for a credit increase online, the creditors will need to pull your credit. In most cases, in this scenario. they will pull your credit with a hard inquiry.
How can I tell if it’s a hard pull or a soft pull?
Requesting an increase on the phone
If you are calling your creditor on the phone for a credit line increase, just ask them.
When applying on the phone with your credit card company, make sure to ask whether they intend to do a hard pull or a soft pull before agreeing to a credit limit increase. Of course, a soft pull is better because no other future creditors will see it! If your credit company does only do a soft pull and you receive the credit line increase, you will potentially see an increase in your credit score the next time it is reported as long as you do not use up the utilization of the increase (meaning you don’t run your available balance up).
Requesting an increase online
If you are applying for a credit increase online, read the fine print before clicking on the submit button. In most cases, they hey will ask your permission to let them pull your credit. If they ask, it will be a hard pull.
Why is a hard pull worse?
If you start applying for credit everywhere and you have a lot of hard inquiries, it may look like you are in distress. Applying for credit too many times and having too many hard pulls in a short amount of period of time will make you look desperate for credit and the hard pulls will lower your credit score.
What Is A Credit Limit and Why Does It Matter?
Your credit limit is the maximum amount of money that a credit card company will allow you to borrow before they require you to pay off the balance in order to keep using it.
The reason that your credit limit matters is because the level of credit utilization makes up 30% of your credit score.
If you are borrowing too much against your credit limit your credit score will be dramatically affected.
Example of utilization
If you have a total credit limit across all your credit cards of $10,000, and you have a total amount owed that you have borrowed (or utilization) of $2,000, then your utilization ratio would be 20%.
Keep in your utilization between 20% and 30% is optimal. Experts say that consumers that have the highest credit scores keep their utilization around 10%.
The lower your utilization is, the higher your credit score will be.
Example of how the credit limit increase can help you
Here is a great example of how you can help yourself and your credit score by requesting a credit limit increase.
Let’s say you have a credit card with a $10,000 credit limit and you owe $4000 on it.
That would make the level of utilization 40%. Having a utilization this high will lower your score.
But let’s imagine that you called your credit card company on the phone and they said that they do soft pulls for credit limit increases. So you ask them for a credit limit increase and they give you a $7,500 increase.
Now your credit limit is $17,500, your balance owed is still $4,000 but now your utilization is only 23%.
By lowering your utilization instantly from 40% down to 23%, your credit score will go up!
How can I get a credit limit increase?
There are 2 ways to get a credit limit increase.
The 1st way to get a credit limit increase
The 1st way is the absolute best. The credit card issuer gives you a credit limit increase on their own. This is called an organic credit limit increase!
You didn’t ask for it, they just gave it to you. You can bet that they did a soft inquiry to check your credit worry this before they did so beforehand.
But who cares because the soft inquiry does not hurt you and you got a credit line increase!
The 2nd way to get a credit limit increase
You take it upon yourself to contact your creditor or lender and ask them for a credit limit increase.
Remember to ask them whether or not the request will be a hard pull or soft pull.
Also, remember that when you ask for an increase yourself your lender may ask for income verification of how much money you make, your employment status, and your mortgage or rent payment. Sometimes they need these additional factors to make a decision on your request for an increase.
Requesting credit line increases are a great way to raise your score quickly
If your creditors do offer soft pulls, it’s entirely possible that you can raise your credit score by calling your creditors and asking for credit limit increases!
If your balances don’t change and your credit limit increases, your credit utilization will go down which will help you to improve your credit score with just a phone call!
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