Urgent Credit Score Help: Went Over Limit

[anm688]

I have six American Express cards. Four of them are charge cards, and two of them are revolving credit cards. With American Express, you can check your spending ability, and spend over your available credit limit. Because I have 0% interest until May 2016, I made a couple large purchases on two of my revolving credit cards after checking with American Express if I can go over my limit. They approved, although this is not the same as a credit limit increase. This put each of the revolving credit cards at 110% and 140% utilization.

I done checked my credit score today and saw a 70 point drop. I'm shocked because I never realized that it would impact it that much.

I just sent the payment in on both of those cards to bring the utilization down below 30%. However, I'm not sure what's going to happen with my credit score. Will it increase again to my regular score after they see the payment? Or did I damage my score for the long term since now there is a history of me having a balance that's greater than my available credit? Please help with any information you may have.

[Anonymous]

The mantra to remember is "utilization has no memory". Your score should recover fully unless other factors are at play.

Carrying a high utilization balance (which >100% certainly is) for an extended period may spook some lenders into AA though.

[anm688]

Thank you so much! Yes, the AA was my worry. So I paid both off and brought it down to under 30% once payment is processed.

[takeshi74]

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@anm688 wrote:
I done checked my credit score today and saw a 70 point drop. I'm shocked because I never realized that it would impact it that much.

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Definitely do your research.  The impact of revolving utilization is commonly discussed here.  It falls under Amounts Owed below.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

As stated above, your utilization will update next time your cards report.  There's no long term damage.  Your utilization is determined based on whatever balances are on your reports at the time.  That said, some do experience bucketing issues where their scores are "stuck" for some time.

Short term high utilization generally isn't an issue.  It's prolonged high utilization that can get you in trouble.

[Anonymous]

You can pay down your balance before your statement cuts to avoid the utilization hit. As in, you make the large payment (to earn the rewards or whatever) and then before they cut the statement you submit a payment to knock back some or all of your balance to well below your limit. When the statement cuts it will report the balance on statement day, with a reasonable utilization.

Of course if you are not DOING anything with your credit score in the next month you might just decide not to care about your score at all and let it ride, optimizing this stuff only in the couple months ahead of a mortgage application. As someone said above, utilization has no memory.

Also... if it has been more than six months since you applied for a limit increase on ANY of your cards, once all your payments posts reducing your balances down to zero or near zero you might want to try asking Amex for a limit increase. The fact that you went over limit, and paid in full, would likely score highly in their internal system.