Credit Score Basics > Does increasing a credit card limit affect credit score?

Does increasing a credit card limit affect credit score?

Wollit Team3 minute read · Updated 29th June 2024

Increasing a credit card limit in the UK can certainly affect your credit score. It depends on multiple things, from how the credit limit is increased to how you manage it.

What does it mean to have a credit limit?

A credit card limit is how much your provider allows you to borrow on your credit card.

For example, if your credit card has a £3,000 limit and your balance (how much you’ve already spent on it) is £2,000, you have £1,000 left to spend.

Once you go over this limit bad things several things happen:

You’ll have to pay penalty fees;
Your provider might freeze your card until you repay at least some of the balance;
And your credit score will take a hit.

How do credit limits affect my credit score?

Generally, higher credit card limits improve your credit score. This is because future lenders view high limits as a positive thing and a sign of trust from other lenders.

However, a higher limit can also affect your credit score, especially if you become tempted to use your cards even more or max them out. This can make it seem like you’re living in debt. It can also make it more likely to fall behind on repayments, hurting your credit score.

How can an increased credit limit hurt my credit score?

An increased credit card limit can hurt your credit score in a few ways:

Every time you make changes to your credit history, like opening new accounts or increasing credit limits, this can initially lower your credit scores until things stabilise.
When you ask for a higher limit, it might lead to a temporary drop in your credit score because the card issuer has to run a hard check on your report. This is especially true if you quickly apply for limit increases on multiple accounts. These hard checks fade in impact over time (1-2 years), but multiple inquiries in a short period can raise red flags. If denied a card limit increase, wait a bit before trying again.
If you're stretching your finances, increasing your limit might worsen things. Can you make higher repayments? Can you really take on more debt? Missing a credit card bill will significantly impact your credit score, which stays on your credit report for six years.

While you can’t see this in your credit score, an increased credit card limit might also reduce your loan approval chances because some lenders see it as potential debt, meaning they might consider your total debt-to-income ratio higher than in reality.

Could an increased credit card limit improve my credit score?

An increased credit card limit can also be a valuable tool to improve your credit score.

A higher limit can lower your credit utilisation rate, which is vital for your credit score. Credit utilisation means how much you’re using of your total credit limit. So, if you have a credit limit of £2,000 and your monthly balance is around £1,000, your credit utilisation is 50%. However, increasing your credit limit to £4,000 brings your credit utilisation to 25% without changing your spending habits.

This 25% credit limit ratio matters – it's what Experian, the largest credit reference agency in the UK, recommends.

An increased credit card limit can also improve your score by making it less likely that you’ll max out your card and exceed your limit – which would otherwise hurt your score.

How can I increase my credit card limit?

There are two ways to increase your credit card limit:

Sometimes, your card provider might increase it automatically for you. This doesn’t require a hard credit check, and it doesn’t hurt your credit score. To be eligible, you must make repayments on time without maxing out your card. Depending on your card provider's policy, you’ll also have to wait at least six months.
You’ll have to request the increase most of the time. This does require a hard credit check, and it might lower your credit score for a short while.

To request an increase, contact your lender. They'll review your application and consider your spending habits, payment history, credit score, income, and how long you've had the card. It’s very important not to have missed any payments în the past.

Also, there's usually a limit of one increase every few months, so if you recently had one, you should wait a bit before requesting it. It will also protect your credit score.

Should I increase my credit card limit to improve my credit score?

Credit cards can be a good credit-building tool. Some even specialise in this – the so-called “credit-building credit cards”.

But remember, they're just one piece of the credit score puzzle. Other factors matter, too, like your voter registration, address changes, bill payments, and even your joint accounts.

But be cautious–credit-building cards often have downsides like low limits and high-interest rates (think 30-60% per year). Missing payments is always a big risk, especially if you fall into debt.

For these reasons, you might also want to look into other tools that can help you build your credit score:

Experian Boost: It can give a quick boost to your credit score by making your regular payments count towards your Experian credit score. Some of these payments can even be things you probably don’t imagine can count towards your score, like council tax and streaming services like Amazon Prime or Netflix.
Wollit: Wollit is a credit-building app that reports your monthly subscription as a loan repayment to all three credit reference agencies, which can potentially improve your credit score across the board. Using an app like Wollit, instead of a credit card, also keeps you safe from high credit card interest and the risk of going over your credit limit.