Does Asking for a Credit Limit Increase Impact Credit Score?

Yes, asking for a credit limit increase can impact your credit score, but it depends on how your lender processes the request.

If the lender performs a hard credit check, your score may temporarily decrease. If they use a soft credit check or account review, your score won't be affected by the inquiry.

If you're approved, a higher limit may also lower your credit utilization, which can be beneficial if your spending stays the same.

KOHO Credit Builder

KOHO Credit Builder is designed to help Canadians establish or build their credit history through consistent monthly payments, without relying on a traditional credit card.

With KOHO Credit Builder, you can:

• +74 points average credit score increase seen using our credit building tools*

• Get approved without a hard credit check or minimum deposit

• Pay no interest on the line of credit

• Track your credit score and credit report directly in the KOHO app

• Build your credit history with monthly payments reported to the credit bureaus

Does a Credit Limit Increase Require a Hard Credit Check?

Not always. It depends on your credit card issuer and how the increase is requested.

A hard inquiry happens when a lender accesses your credit report as part of a credit decision. Hard inquiries can affect your credit score. A soft inquiry, including certain reviews of an existing account, does not affect your score.

TransUnion notes that lenders may review existing accounts for things such as limit increases, and account review inquiries do not affect your credit rating.

Before requesting an increase, you can ask your card issuer whether the request will require a hard credit check.

Can a Higher Credit Limit Help Your Credit Score?

It can. A higher credit limit can reduce your credit utilization rate, which is the percentage of your available credit that you're currently using.

For example, if you owe $1,000 on a card with a $2,000 limit, your utilization is 50%. If your limit increases to $5,000 and your balance remains $1,000, your utilization falls to 20%.

The Financial Consumer Agency of Canada recommends trying to use less than 30% of your total available credit.

When Could a Credit Limit Increase Hurt Your Credit Score?

A credit limit increase could negatively affect your score if:

• The request results in a hard inquiry

• You request increases or apply for new credit frequently

• The higher limit encourages you to take on more debt

• You begin using a larger percentage of your available credit

Too many credit inquiries within a short period may negatively affect your credit score and can signal that you're seeking a significant amount of new credit.

Should You Ask for a Credit Limit Increase?

A credit limit increase may make sense if you manage your existing credit responsibly and don't plan to increase your spending simply because more credit is available.

Before requesting one, ask your lender whether they'll perform a hard or soft credit check. If the increase doesn't require a hard inquiry and you keep your balance low, the additional available credit could help you maintain a lower credit utilization rate.

^{*Based on users with a starting score of 450 or under and who used all of our credit building tools (i.e. Credit Building, Secured Credit Building) for 12+ months with on time payments. Credit building tools we offer are not a credit repair tool and does not guarantee an improvement in credit score. Credit scores are based on complex models involving a variety of factors. Consistent on-time payments help improve scores and missed or late payments may cause credit scores to decrease. Outcomes may vary among users.}