Impact on Credit Report: High Balance vs. Limit

[6FeetUnder]

Hello,
While looking through my credit report, I noticed that it reports the limit of the credit card as well as the high balance of the credit card. I have reported a high balance of about $10,500 with a limit of $9,000.

Would this have a negative impact on my credit score?

Would it get me a few points if I increased my limit so it showed that I was not over the limit?

Any other impacts? (Other than an increase of available credit, for example when purchasing a house?)

Thanks!
Chris

[Ima saver]

Yes, this will have a negative impact on your credit score. You need to lower your balance as much as possible.

[6FeetUnder]

That is not my current balance. My current balance is around $500. This is my historical high balance on the card. If I increased the limit, it wouldn't look like I was over the limit. (The balance is almost paid off)

Is this worth my time?

Chris

[poundwise]

No. This is irrelevant. Your limit and your current balance are factors that matter.

The historical high balance on many persons' reports might be askew like that for many reasons, including requesting that one's limit be lowered on any given card account.

Also, you are looking at it with concern that the historical high balance reflects poorly against the current credit limit, however, consider comparing the historical high balance against the current balance and now it is an apparent positive.

Bottom-line, however, is that you ought not be concerned with this.

Also, congrats on paying down that balance!

[vsjhoc]

As long as the credit report includes your credit limit, the high balance doesn't matter (unless it's also your current balance).

The high balance only matters for those cards like Crapitol One [yes, that was intentional ] and AmEx that don't report credit limits and substitute the high balance instead. Your limit is $9,000, so keeping your balance under $3,000 is the best place to be -- and you're well within that at $500. Good luck!

[vishenda]

Yes, this is negatively affecting your credit score. It shows lenders you don't effectively live within your means, and you're over-exerting your spending. You can try to increase your limit, but creditors may not even attempt to do this if you're already over your limit. The best thing to do would be to pay this credit card down immediately. Don't increase your credit limit. Make your usual payments to your creditors as long as you are not behind.
In terms of your credit score they judge it by a debt to income ratio.
so if your dept is 10,000 and your income is (an imaginary number) 30,000 your ratio is 10000/30000 = 33% (this is an annual example)
I think a creditor will look at your monthly ratio. The higher the percentage the poorer your credit is. As well, late payments and such don't help out. If you have a good excuse and have caught up with a behind credit bill you can call them and ask them to remove the record of the late payment. Some will, some wont.

[vsjhoc]

There's some confusion here about what affects the credit score, and what affects a potential lender's analysis of your credit.

The high balance does not affect the FICO credit score. The debt to income ratio does not affect the FICO credit score because income isn't even part of the mix. However, these two factors may be considered by lenders who are reviewing your loan application.

[poundwise]

I do not mean to be rude to anyone, however, a couple of these posts are not accurately addressing the question.

What the original poster describes does not, in itself, affect his score negatively.

The statement, "It shows lenders you don't effectively live within your means, and you're over-exerting your spending. You can try to increase your limit..." shows a misunderstanding of the situation and the question.

The original poster has a balance of $500 on a credit card with a $9,000 limit. There is no reason at all to think that shows anyone that you are over-extending with your spending. Also, there is of course no reason at all to advise, or even suggest, to increase the limit.

Again, not being rude, but these answers can make something that is not confusing... well, confusing.

The poster says he has a limit on the account of $9,000. There is a current balance of $500. Obviously, there is not a problem there. The ratio is not a problem. The total debt is not a problem. There is nothing wrong here.

The question stems from the fact that the credit report also shows what the highest balance on the card account was, historically. That figure is $10,500. The poster wanted to know, since that says his historical balance was $10,500 and his current limit is $9,000 does that negatively impact his score.

The answer is no. It does not.

The card account may have had a $15,000 limit at one time and the poster lowered it to $9,000. This may not be the case. It may be the poster was over-limit by $1,500 at one time. (Which would have impacted the credit score THEN.) That fact is, neither the report nor the score, establishes or utilizes the details of that.

Bottom-line. The historical high-balance has no bearing in comparison or calculation pertaining to the current limit on the account. There is also nothing here that would be viewed "by lenders who are reviewing your loan application" as anything negative.

[6FeetUnder]

Thank you very much for your answers, and great clairification, PW! I will not call to increase that credit line.

I am just trying to make the jump from 746 to 750... I'm sure every little thing will help!

Chris

Originally Posted by 6FeetUnder

Thank you very much for your answers, and great clairification, PW! I will not call to increase that credit line.

I am just trying to make the jump from 746 to 750... I'm sure every little thing will help!

Chris

pay them off in total each month, worked for me

[poundwise]

Originally Posted by 6FeetUnder

Thank you very much for your answers, and great clairification, PW! I will not call to increase that credit line.

I am just trying to make the jump from 746 to 750... I'm sure every little thing will help!

Chris

Although typically I find that most posts dealing with raising your credit score are either pointless or dealing with what is largely a waste of time and effort (IMO), it certainly is worthwhile to get your credit score into the mid-700s, especially if you are looking at refinancing or obtaining a mortgage.

Most lenders offer the best rates to borrowers with a credit score of 750-760 or higher. E-LOAN, for instance, details their best rate offer for a mortgage loan as having certain requirements; among them they state, "FICO credit score is 760 or greater."

So, while I wouldn't bother taking steps to reach for 800, etc., or as some do, ever higher numbers as if you get some prize for having the highest, I would think it prudent to try to increase a score of 746 to 760.

Of course, bear in mind, that when seeking a mortgage loan there are other factors besides your score that matter and also, lenders vary.

Best wishes.

I couldn't agree with PW more.

as I've stated ad nauseum, my score didn't get to a high level until I didn't care anymore (stopped the majority of my credit activity).

I still keep an eye on it to make sure nothing weird happens but I certainly don't have charts and graphs hanging all over the place as I try to determine whether eating my cheerios before my shower is better for the score than eating them after.

A silly statement yes but that's the impression I get of some people's obsession with their score (not you Chris).