Average Credit Limit

[Pigeyex]

Does a low average credit limit negative affect my credit scores?  Or is it only to the extent that it affects my credit utilization %?

In the "Understanding Your Score" section of my Experian membership, it says this, which I don't believe is correct:

"3. Your average credit card limit is less than $2,000.
Lenders understand that it is much easier to manage a small amount of credit vs. a large amount of credit. Your relatively low credit limits signal to lenders that you have not had experience managing large amounts of credit, which makes them worried about extending more credit to you."

It's always been my understanding that only to the extent that low CLs affect one's credit UTILIZATION do they even matter.

Which is it?

Pigeye

[Creditwiser]

My understanding is that it does not reflect your scores.  It does affect how ( some ) lenders view you and their willingness to extend more credit to you. But not your scores. My Son is a good example of this. He has several CC's, all prime lenders with relatively low limits. 1000, 1500, 2000, yet his scores are in the miid to upper 700's. 

[MarineVietVet]

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@Pigeyex wrote:

Does a low average credit limit negative affect my credit scores?  Or is it only to the extent that it affects my credit utilization %?

In the "Understanding Your Score" section of my Experian membership, it says this, which I don't believe is correct:

"3. Your average credit card limit is less than $2,000.
Lenders understand that it is much easier to manage a small amount of credit vs. a large amount of credit. Your relatively low credit limits signal to lenders that you have not had experience managing large amounts of credit, which makes them worried about extending more credit to you."

It's always been my understanding that only to the extent that low CLs affect one's credit UTILIZATION do they even matter.

Which is it?

Pigeye

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For scoring purposes FICO does not ever look at CL's. It only scores the percentage of available credit being used at any one point in time.

Ignore this EX "advice".

[Pigeyex]

OK, thought so.  Thanks guys!

[Anonymous]

It may not affect your score but how does it look to lenders? I read it as saying some lenders may look at it unfavorably not that it affects your scores. This would show up in a manual review say for a mortgage.

[Pigeyex]

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@Anonymous wrote:

It may not affect your score but how does it look to lenders? I read it as saying some lenders may look at it unfavorably not that it affects your scores. This would show up in a manual review say for a mortgage.

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Yeah, except it's on their "Understanding your Score" tab, and it's headed with "Things that May Negatively Affect Your Score."

[Anonymous]

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@Pigeyex wrote:

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@Anonymous wrote:

It may not affect your score but how does it look to lenders? I read it as saying some lenders may look at it unfavorably not that it affects your scores. This would show up in a manual review say for a mortgage.

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Yeah, except it's on their "Understanding your Score" tab, and it's headed with "Things that May Negatively Affect Your Score."

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Don't throw the baby out with the bath water. I would be inclined to think that it's in the wrong section but the advice could well still be valid. Probably worth asking in one of the other forums to see if it has come up on a manual review.

[bk510]

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@Creditwiser wrote:

My understanding is that it does not reflect your scores.  It does affect how ( some ) lenders view you and their willingness to extend more credit to you. But not your scores. My Son is a good example of this. He has several CC's, all prime lenders with relatively low limits. 1000, 1500, 2000, yet his scores are in the miid to upper 700's. 

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I tend to agree with this.

[bk510]

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@Anonymous wrote:

It may not affect your score but how does it look to lenders? I read it as saying some lenders may look at it unfavorably not that it affects your scores. This would show up in a manual review say for a mortgage.

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This would depend on your internal score with the lenders.