How Badly Does My Credit Score Get Affected if I Go Over My Credit Limit on One of My Cards?

by Neil Kokemuller
High balances on one card can potentially impact other loans and card accounts.

You might be surprised to learn than going over your limit on a credit card actually has little to no direct impact on your rating, according to reporting bureau Experian. This doesn't mean that exceeding the limit or even coming close to it is a good idea.

Direct Effects

All credit cards have usage limits. Typically, young borrowers with limited histories have relatively lower limits. If you have a card with a $3,000 limit, you exceed that amount the moment you complete a transaction that pushes your balance past it. In some cases, you face no consequences if you pay the balance down before your next statement. Often, though, you pay overlimit fees to the card provider. You may also see an increased interest rate on your card as outlined in your cardholder agreement and account terms.

Debt-to-Limit Ratio

Though your overlimit experience and fees aren't directly reported to credit bureaus, high credit utilization ratios are bad news in general. This ratio is the amount of debt you're using compared to what you can use. In essence, you have a ratio of more than 100 percent if you are over a card's limit. Borrowers with good credit usually have much lower ratios. Excellent borrowers commonly use 10 percent or less of these allowed limits. According to the MyFICO website, 30 percent of your credit score is based on a comparison of your debts to limits.

Report Implications

Even though your rating isn't directly impacted by going over the limit, your credit report typically shows potential lenders both your balances and limits on loan accounts. Thus, if you apply for a new loan or card, the lender can review the entire report. Even if you have a decent score, a lender may refuse a new loan or offer a high rate if you have one or more card accounts with balances near or above available limits.

Responsible Use and Limit Increases

Ideally, you can avoid the risks of exceeding your card limits through responsible use. If you look at cards as an emergency device rather than a tool for regular spending, you have a better chance of staying under the limit. You can also request a credit limit increase on cards with low to moderate limits. You should do this after you have demonstrated responsible use. Card providers likely won't grant you such a request if you are at or over the limit, as they fear you will only run into the same problem if allowed more debt.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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