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How much do limits (vs. utilization %) impact your score?

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Simmoja3
Member

How much do limits (vs. utilization %) impact your score?

Hello all,

 

I've always been under the impression that for the most part, the aspect of your score that comes from utilization was based on - primarily - what percentage of your limits on revolving accounts you were using.  Curious on how much impact higher limits may have - obviously the same balance with a higher limit means a lower utilization, but does 10% utilization with a total revolving limit of $2,000 count for less than 10% on a max of $20,000?

 

Understand it's never actually that simple.  Trying to find a way to bump my score up by - exactly - 8 points on TU.  Major delinquencies are all 4+ years old, utilization is hovering about 7%, no collections/etc... basically nothing I can think of other than I've only got 1 credit card with a $2K limit. 

Message 1 of 6
5 REPLIES 5
namvet
Established Contributor

Re: How much do limits (vs. utilization %) impact your score?

Short answer......NO. 10% of one amount is the same as 10% of another amount.   It would make sense that higher limits would be less impacted but not so IME.  If i am wrong you can count on a reply from some other knowledge driven people here. 

Message 2 of 6
pizzadude
Credit Mentor

Re: How much do limits (vs. utilization %) impact your score?

 

If you only have one open credit card, then you are getting dinged for the fact that all your CCs have balances.   Generally FICO likes to see 2 or 3 open cards, and only one carrying a balance.  

 

However remember that there can be a short term ding to your score when you open an account, due to lower AAoA and inquiries.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 3 of 6
ScoreBooster
Frequent Contributor

Re: How much do limits (vs. utilization %) impact your score?


@namvet wrote:

Short answer......NO. 10% of one amount is the same as 10% of another amount.   It would make sense that higher limits would be less impacted but not so IME.  If i am wrong you can count on a reply from some other knowledge driven people here. 


You are absolutely right. I'm always stressing out this fact because there are some FAKO scoring-models out there that simply "punish" you for having a low CL - no matter if your utilization is perfect or not.

Message 4 of 6
pipeguy
Senior Contributor

Re: How much do limits (vs. utilization %) impact your score?


@namvet wrote:

Short answer......NO. 10% of one amount is the same as 10% of another amount.   It would make sense that higher limits would be less impacted but not so IME.  If i am wrong you can count on a reply from some other knowledge driven people here. 


I agree with this statement, 10% is 10%. However, lenders rather than Fico scoring, like to see somewhat higher limits to your tradelines. I know some lenders will "match" another limits and Capital One defines "Excellent Credit" on their site as #1: I have not been more than 60 days late on any credit card, medical bill, or loan in the last year #2:

I have not been more than 60 days late on any credit card, medical bill, or loan in the last year #3:  have never declared bankruptcy or defaulted on a loan (AND)

I have had a loan or credit card for 3 years or more with a credit limit above $5,000.


Since we think of higher Fico scores as a means to get the best interest rates and terms, I think "lenders" look at more than the 10% is 10% factor in the over all pictures, especially if its not an automatic approval situation.


 

Message 5 of 6
Simmoja3
Member

Re: How much do limits (vs. utilization %) impact your score?

Got it, thanks!  My question was based entirely off one FAKO score which complained that I didn't have more open cards. Getting another card is definitely in the plan for the relatively near future, and I think with my score now (hovering around 690) I should be able to get one, but I've been holding off until finishing the mortgage first!

Message 6 of 6
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