How does a credit card limit affect credit score?

  • #1
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My bank decided they wanted me to have a bigger credit card limit without me asking. I never carry a balance month to month, and I rarely use more than 20% of my current limit. They increased the credit limit by 36%

Will this hurt my credit score? Should I call and have them change it back? The actual limit is pretty much meaningless to me, anything above $2,000 might as well be "no limit," because I don't use it.

Do you think this will hurt my credit score? Will having all of this extra unneeded credit lower my score? Or do you think it will actually help, because my used credit vs total credit available ratio will be lower? Should I call them up to have them undo this change?

Credit scores are confusing.
 

Answers and Replies

  • #2
Pengwuino
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From everything I have read from financial advisers and consultants is the opposite is true. More available credit = higher credit score.
 
  • #3
Evo
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Greg had a thread on this with a lot of good information. I'll look for it later. What's good for your score seems counterintuitive.
 
  • #4
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while more available credit might improve your score, several open & active, but zero balance credit cards may not as it means you could potentially charge $10,000 overnight and be unable to cover other payments.

Credit Score is funny, while making a list of what may or may not affect it, exactly how it affects is difficult. I have never seen a clear, concise formula for determining credit score.
 
  • #5
Pengwuino
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while more available credit might improve your score, several open & active, but zero balance credit cards may not as it means you could potentially charge $10,000 overnight and be unable to cover other payments.

Credit Score is funny, while making a list of what may or may not affect it, exactly how it affects is difficult. I have never seen a clear, concise formula for determining credit score.
There is no such formula as each credit bureau's methodology is proprietary. I have also never heard anyone say it's bad to have open and paid off cards for that reasoning. The credit scores don't take into account preposterous actions such as overnight charging $10,000 worth of credit. You could do that with a bunch of cards that are at half their credit limit, it doesn't have to be a paid off card. Having active and paid off credit cards is good. Letting them go inactive is bad because they could close your account and your score will take a hit because your available credit goes down.
 
  • #6
Borg
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My bank decided they wanted me to have a bigger credit card limit without me asking. I never carry a balance month to month, and I rarely use more than 20% of my current limit. They increased the credit limit by 36%

Will this hurt my credit score? Should I call and have them change it back? The actual limit is pretty much meaningless to me, anything above $2,000 might as well be "no limit," because I don't use it.

Do you think this will hurt my credit score? Will having all of this extra unneeded credit lower my score? Or do you think it will actually help, because my used credit vs total credit available ratio will be lower? Should I call them up to have them undo this change?

Credit scores are confusing.
To address this specific question, it is unlikely to affect your current score unless your bank informs the credit bureaus of your limit - in which case it will probably go up. http://money.howstuffworks.com/personal-finance/debt-management/credit-score.htm"

Since the credit bureau usually doesn't know your exact limit, they base it on your highest balance and determine your level of debt from that (http://credit.about.com/b/2007/11/21/your-credit-score-calculation.htm" [Broken]). My credit card shows a "highest balance" that is thousands less than my actual limit. Fortunately, my highest balance is well below what I actually spend and I pay it off every month. You can see what they have for your highest balance through the credit report link below.

Most banks don't post the limit because they don't want other banks coming after their good customers. In a way, they purposely keep your credit score down by not reporting your limit.

The credit bureaus won't give you your score for free but they are required to give you one free credit report each year. You can access the reports through https://www.annualcreditreport.com" [Broken]. I don't check all of them at once but instead, check one of the them every four months. BTW, I've been getting my reports for years and the bureaus are extremely anal about not giving you a report even one day before your year from your last report is up. :rolleyes:
 
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