Credit Limit question

[jwelch47]

Is it true that low credit limits reduce your credit score? I understand that if you had a low limit it would be easier to max it out and change your ratios, but that aside does having a low limit actually hurt your score? If you have the exact same credit history of someone with a 300 credit limit matched up against someone with a 20000 credit limit with a 0 balance and same payment history and thats all, would the person with the 20000 limit have a better credit score? If so, what is determined to be a "high credit limit?" The reason I ask is because the explanation of your credit score from true credit sites "you have one or more accounts with a low credit limit" as a reason for having a lower score. My balance is only 2% by the way, so thats not the reason. Just curious and would like everyones input.

[Trish]

That's a good question.... I thought I knew the answer but looked it up at myfico to make sure. :D
From what I can tell, it's not the limit.....it's the utilization. So as long as you keep % down to at least less than 50%, you should be ok. Some people will even tell you to keep it below 30%.

You know.. I thought for some reason that if you had higher credit limits, it looked better (even if utilization was good)... but apparently not. Just make sure and keep the balances down.

You should look around at myfico.com.... they actually have quite a bit of good info on there. They also will tell you exactly what mix of credit is best in order to increase your score.

[jwelch47]

I was under the assumption that you needed high credit limits to get a high score but I never found any documentation to support that, only other peoples assumptions on it and that reasoning from the FAKOs. It's nice to know that its not the case and my old low limit accounts aren't hurting me.

[Trish]

Wellllll...... here's an interesting tidbit I ran across today. Ironically... after pulling my own report and looking at my scores this morning on Credit Secure..... I glance down and started reading their "suggestions" as to why my score is only "fair"...(I am at 673 on the one they call fair :rolleyes: )

check this out:

Your overall balances are close to your overall credit limits, which may be lowering your score. Having high credit limits shows lenders that you are responsible with your credit, but when your balances are also high, it can indicate to lenders that you are likely to overextend yourself.

Having low credit limits on your accounts and loans counts negatively against your credit score. Having a high amount of credit is a positive factor because it indicates to lenders that other creditors have trusted you by lending you money in the past. However, since your major credit card limits are generally low, lenders may think you dont have enough experience with high limits.

The above is true for me. I am currently working on getting my balances down (I am over 50%)... and my CLs are not very high. I have several cards that only have a CL of $300.

So.... now I've confused the both of us.....
May have to do a bit more research on this.

I honestly do not think having low CLs will hurt your score as long as it's reporting positively with low utilization. BUT.... I'm now thinking that the higher the CL (with low utilization of course), the better your score will be.