High Credit Card limit + low utilisation = Helps credit score

newcar2016

Does having a high credit card limit with low utilisation i.e. rarely paying interest help your credit score?

coylemj

newcar2016 wrote: »

Does having a high credit card limit with low utilisation i.e. rarely paying interest help your credit score?

Those are two separate attributes so there are two answers:

1. Having a high credit card limit with low utilisation does nothing for your credit rating. The reason is that during the boom times the CC companies continually jacked up the credit limits on CC accounts so there is a large cohort of people out there (me included) who hardly ever put a dent in their CC limit.

2. Rarely paying interest is good, never paying interest is better.

newcar2016

coylemj wrote: »

Those are two separate attributes so there are two answers:

1. Having a high credit card limit with low utilisation does nothing for your credit rating. The reason is that during the boom times the CC companies continually jacked up the credit limits on CC accounts so there is a large cohort of people out there (me included) who hardly ever put a dent in their CC limit.

2. Rarely paying interest is good, never paying interest is better.

Ok thanks, well I saw some articles online saying a high limit with low utilisation was good for your rating, however these were american based websites.

BuffyBot

newcar2016 wrote: »

Ok thanks, well I saw some articles online saying a high limit with low utilisation was good for your rating, however these were american based websites.

..well that might just be one explanation

Different countries, entirely different systems.

newcar2016

BuffyBot wrote: »

..well that might just be one explanation

Different countries, entirely different systems.

So is it bad to up your limit even if you don't need it? I was thinking in the unlikely event that if we suddenly found out a meteoroid was heading for ireland, or if a nuclear bomb went off in the UK or whatever, flights to Australia would become very expensive and a high limit could come in useful..

Nody

newcar2016 wrote: »

So is it bad to up your limit even if you don't need it? I was thinking in the unlikely event that if we suddenly found out a meteoroid was heading for ireland, or if a nuclear bomb went off in the UK or whatever, flights to Australia would become very expensive and a high limit could come in useful..

I have no insider information but I could easily see it hold against you; basically for the bank you ask for a loan for 300k but you have a credit card with a monthly limit of 10k EUR means you could struggle to pay that loan if you'd go maxing out that CC even if it has not happened before.

coylemj

Nody wrote: »

I have no insider information but I could easily see it hold against you; basically for the bank you ask for a loan for 300k but you have a credit card with a monthly limit of 10k EUR means you could struggle to pay that loan if you'd go maxing out that CC even if it has not happened before.

I see your point but if the bank can see the limit on the credit card, they can also see how you manage it and if you're clearing the balance every month to avoid interest, that will count in your favour regardless of the credit limit.

It was the practice in the boom times for the CC companies to jack up the limit whether you asked for it or not (they can no longer do it unsolicited) so having a big limit on your CC account says nothing about your spending habits.

AlmightyCushion

If a big limit works against when applying for the mortgage you couldn't you just ring them up and get it reduced?

phormium

A big limit is not going to work against you, it's the outstanding balance and general management of the credit card that matters.

Large outstanding balance would definitely not be a good thing as the bank will treat it as a loan and factor in repayments which will reduce your borrowing capacity. Not to mind the fact that you shouldn't have an outstanding balance if applying for a mortgage, well nothing other than the transactions for that month. Clear any credit card monthly from wages which shows you can budget and live within your means.