Will it hurt my credit to accept a credit limit increase?

Question

I got an email from Citi offering me a credit limit increase on my 4 year old card:

Subject: Good News About Your Citi Card - Please Open Immediately

It's our job to make sure your Citi card is the right card for all of your plans. So we are pleased to inform you that you could be eligible for a credit limit increase.

...

You'll receive an immediate decision via our site or a live customer service agent.

Will accepting an offer like this have a negative impact on my credit score, such as a hard pull, or on my ability to obtain credit in the future? To put it another way, are there any reasons I shouldn't accept it?

Edit: I went ahead and accepted it, and the form assured me, "We did not pull a credit bureau report during the evaluation process." If a hard pull does end up showing up I'll be sure to say so.

Answer 1

Yes, they will probably do an hard pull (inquiry). This will hurt your score a bit. In about 12 months that effect will be mostly reduced and after 2 years it will be totally gone. How much of an effect this will have depends on what your credit score is now, how many other inquiries you've had recently and have in the near future, etc.

If they approve the increase, that will probably improve your score. It will increase your total credit available and thus decrease your utilization. This is true if you either carry a balance, or use credit cards regularly, even if you pay the balance every month. How much of an effect this has depends on your current utilization ratio.

Whether this is a net positive or negative for your score depends on which of these effects ends up stronger. Also, the utilization effect will last indefinitely, while the inquiry effect will fade away, so if you don't expect to need credit in the next 12 months, but your score could use a boost, it might be worth trying.

Answer 2

Its best to increase your credit limit in intervals when you don't need it. The hard pull will only slightly affect your credit score and will be more than negated by the utilization ratio increase.

Answer 3

You can run a simulation on a site like CreditKarma to see how it will affect your score, although I don't think they will project it into the future to show the fading away of the "hard pull" influence.