Does upgrading credit card affect credit score?
Yes, increasing your credit limit can affect your credit score, but the impact depends on how the increase is processed and how you use it afterwards.
If your bank offers you a pre-approved increase, it usually involves a soft inquiry, which does not affect your score. But if you request a hike, the lender may run a hard inquiry on your credit report. That can cause a small, temporary dip of a few points.
That said, a higher limit can actually work in your favour if you manage it wisely:
- Lower Credit Utilisation Ratio: For instance, if you spend ₹40,000 on a card with a ₹1,00,000 limit, you are using 40%. If the limit rises to ₹2,00,000, the same spend is just 20%, which is healthier for your score.
- Better Flexibility: More room for emergencies or planned expenses without maxing out.
- Improved Creditworthiness: Lenders see you as capable of handling larger credit lines responsibly.
When the bank automatically increased my card limit, my score did not drop. In fact, keeping my spending steady helped it improve. The key is simple: do not overspend just because you can.
So yes, a limit increase can impact your score, but when used wisely, it usually turns into a positive.