The advice in this thread is mostly spot on, but there are rare situations when a CLI rejection might make sense. In 99% or more of the cases, CLIs are good. Generally, you want to accept them when they are offered by the lender since no HP occurs. However, at times, a CLI might not make sense.
For example, some lenders are more picky than others when it comes to overall available credit. If a CLI puts you over 100% of your annual income in CLs, some smaller lenders and CUs might be less likely to approve your application. While few major lenders are thrown off at 100% of your income in CLs, if you made that number 500%, more lenders would be cautious. The majority of people don't have CLs that are multiple times their income, but some do. For these individuals, sometimes a CLI is not helpful if they are hoping to secure new credit with more finicky lenders.
Again, 100% or even 200% of annual income of credit limits will not hurt people with strong credit who are looking to secure credit from Chase or Amex. The local CU or another small lender might be more skeptical. The good news is it is very easy to ask for a CLD, while CLIs are hard. So even if you acquire too much credit, you can fix it easily.
I normally would avoid explaining why in fringe circumstances a CLI can be bad, but these forums seem to be filled with CLIs are always good posts. While CLIs are great choices 99.9% of the time for most people, I would not use a strong word like never when it comes to declining a CLI. One should generally not decline CLIs, but there are exceptions to every general rule.
DIsclaimer: I have over 100% of my annual income in CLs and I have never rejected a free CLI. With that said, I rarely seek CLIs and might consider declining one now if I felt it would increase my chance to get a card I wanted (not the case at the moment).
It is a very good thing and a beginning of good things to come. So take it..
