Home > Credit 101 > Why Does My Credit Card Limit Affect My Credit Score?

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Occasionally we get questions from readers who have gotten an automatic credit limit increase, and they wonder if there is a downside to accepting it. Or they close a little-used account and their credit scores go down, even though they are using cards and paying them off exactly as they had been.

What’s going on here? Credit scores are calculated in part based on how much of your available credit is being used. You can calculate your overall utilization by adding up all the reported balances on your revolving accounts (i.e. credit cards, lines of credit) and dividing that figure by the total credit limits. Credit scores also weigh in each individual account’s utilization rate.

Your amount of debt, which includes your “debt usage,” (or “utilization”) as it’s called, accounts for roughly 30% of your credit scores. That’s more than any other single factor except paying on time, which accounts for about 35% of your score. Getting a higher credit limit can be a good thing — assuming you don’t increase your debt in tandem — because it results in a lower debt utilization.

In general, the lower your balances relative to credit limit, the better. Credit experts suggest keeping this ratio at 25% or less, but if you are trying to improve your score, you may want to aim for no more than 10%. (You do want to use at least one of your credit cards, though. Having no activity at all doesn’t offer much insight into your repayment habits, and unused cards are at risk of being canceled, which would reduce your available credit and lower your credit age, another major scoring factor.) Using a credit card payoff calculator like this one can help you determine how long it will take you to get out of debt.

If you are concerned that you might be using more than the optimal amount of credit, you can set up mobile alerts to let you know when you are nearing a set spending amount. You can also pay early (or multiple times per month) to keep the balance low. This can be particularly smart if you are rebuilding credit with a secured credit card and have a low limit. You may also want to consider getting another credit card to lower your overall debt utilization rate — you can shop for credit cards on Credit.com.

So is there any reason to even hesitate at the idea of a higher credit limit? There might be, if a higher limit will tempt you to spend more than you need to (or spend currently). A little self-knowledge can tell you if this is a danger.

Another time you may want to choose a lower credit limit is if you add an authorized user to your card. Adding someone to your account gives them access to your entire credit line. If you intend to give your child, or a significant other, access to your card, it might be wise to limit the damage that can be done if he or she doesn’t handle it as responsibly as you hoped. (You can also set up credit alerts to let you know when the card is used.)

Finally, if you co-sign a card application, be aware that this card will affect your credit as if it were your own. That means the credit limit, any late payments, etc., could affect your score. And, unless the terms and agreements say otherwise, the credit limit can be changed without your knowledge or approval if the primary borrower is at least 21 years old.

It’s one more reason to keep tabs on your credit scores. Credit.com’s free credit report summary can help you see how your debt usage is affecting your scores, how much of your available credit you’re using and how your debt usage compares to your peers.

More on Credit Reports & Credit Scores:

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  • sin

    I got a letter in the mail saying my credit limit was increased on of of my cards I’ve been with for almost 4 years. It was my driest credit card at 19 and I don’t have a balance on it (Victoria secret) I usually pay with the credit card in the store then immediately pay my balance off with cash or half , and do an automatic payment for the rest of the balance later on.

    Anyway, I went to check my balance online and it told me my limit was 250 (although the letter said they increased to 300) and when I went to check my score and it told me that one account has lowered my limit so it affected my score. So I’m a really upset that A. I didn’t even apply for a higher limit and they gave it to me just to take it away before I got the chance to use it? I didn’t think that was possible because I’m really trying to increase my score and that just sucks.

  • Tekkenfighter123

    My credit card increased my limit without telling me. So now my score dropped like 14 points. I know it will go back up, and I still have really good credit even with the drop. I just don’t like something happening when I have no say.

  • Tyler-James Simpson

    I have a default account under my name which is an error and I am currently in the process of getting this removed as it’s the only negative on my score
    My question is
    If this is removed will my credit score show as if this never happened ?

  • JandC0723

    I am new to credit so I recently got two cc’s. One of my cards got a increase from 500.00 to 1500, and the other from 300 to 800. I only charge tops 10.00 a month on each and pay off as soon as the statement comes. My question is, should my credit line increases cause my score to increase? Also, I keep reading I forums that people with the best scores have about 7 credit cards, how many do you recommend for top score ability?

    • http://www.Credit.com/ Gerri Detweiler

      It sounds like you are on a solid path. I don’t believe you need to load up on credit cards. At some point it may make sense to get some kind of installment loan such as a car loan or personal loan, but it’s not urgent. If you get your
      free credit score from Credit.com you will get an action plan for your credit as well.

      • JandC0723

        Thank you for the information. I already have a car loan. Car loans are pretty much the only credit I’ve ever had before these two cards. I really have no interest in having a bunch of credit cards, so I’m very happy with your response, Thank you again. Should I see a score increase with my new credit limits?

        • http://www.Credit.com/ Gerri Detweiler

          Good to know. Credit limits don’t directly increase your credit scores, and since your utilization is already low then you may not see much of an increase. But it’s a good sign that they are raising your limits!

          • JandC0723

            Thank you for your help. Your advice is always appreciated

          • http://www.Credit.com/ Gerri Detweiler

            You’re most welcome! Keep us posted on your progress – we’d love to be able to feature you as a success story in the future. 🙂

      • WBEL

        I have seen that my score could be improved if I had a loan and was paying it off, showing that I was a good consumer. I do not have any debt but I need a loan to improve my score. It was my weakest category on my free score from credit.com. Iwant to improve it (my score) but dont want to pay for it.

        • http://www.Credit.com/ Gerri Detweiler

          That’s understandable. Then your best strategy may be to just continue to do what you are doing.

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