Over the limit impact? Short or Long term? Cannot find a straight answer.

[danny4l]

Hi guys,

I'll explain this as simple as I can.  Can you please explain it as simple as you can?

Went over my credit limit by $5.  I didn't think it was that big of a deal.  I open up my credit monitoring the other day and it says their is "1 potentially negative item on my credit report."  Logged in and it says the card issuer is reporting the account as negative.

Does this impact your score for as long as you are over the limit or is this one of those 7 year things?  Every explanation online keeps reminding you this is a utilization issue and I feel that is not the right information because you can have high utilization without going over the limit so I don't understand why I can't get a straight answer online from even the credit reporting sights.  I called up Experian and the card issuer and they put me to sleep with their convoluted explanations.  Finally when I wore em down a bit by staying on the line, the card company told me to call the credit bureau and when I called the credit bureau, they told me to call the card company because they "did not know how it would affect my score."  As of today, I have no answer how this is going to affect my score in the short term or long term and I'd kinda like to know.

Any insights into this?

[Anonymous]

It's temporary. But running any card individually at high utilization may hurt you when the "trending" add-ons to FICO are more utilized by lenders but few of them do.

FICO does note "highest credit used" but that field is not affecting the score calculation. It's a remark field for the most part, not a data field. Some lenders may note it on manual review but also unlikely.

As soon as you pay it down and it reports your scores won't reflect it anymore.

Remember you are considered maxed out when a single card reports 89% utilization.

FICO does offer trending data as an option but I don't know of any bureaus or lenders who admit to using it. The bureaus all have their own products as well which theoretically you could demand reports on but I never attempted it. Experian has a trended credit history product called Trended Solutions, Equifax offers theirs under Dimension, and TransUnion has one called CreditVision.

[Anonymous]

@danny4l

I deleted your duplicate post in the credit card forum. Please do not cross post in different forums. It is confusing to other members trying to assist you and is against forum rules. Thank you for your understanding and cooperation.

[danny4l]

Interesting, now why was that so hard to find online?  All I needed to know was "temporary."  They make it seem like this is a bankruptcy of sorts.

[danny4l]

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@Anonymous wrote:

@danny4l

I deleted your duplicate post in the credit card forum. Please do not cross post in different forums. It is confusing to other members trying to assist you and is against forum rules. Thank you for your understanding and cooperation.

My apologies.  This new website layout is confusing the hell out of me. 

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[Anonymous]

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@danny4l wrote:

Interesting, now why was that so hard to find online?  All I needed to know was "temporary."  They make it seem like this is a bankruptcy of sorts.

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The issue here is that there are many chefs in the soup and they all have different biases to what data you're seeing and why it's there.

The big thing to understand is that FICO isn't your score -- it's their score that they sell to lenders to gauge an individual's risk at the current snapshot in time.  If a lender pulls your report RIGHT NOW, FICO wants them to know that you're a poor manager of credit so that the lender can make a decision.  Being over limit means you not only used all the credit extended to you, but some more.  To lenders, that's a red flag that if they extend you credit, you may also go overlimit with them.  So it's a snapshot in time based on right now.

But because you haven't defaulted or paid late, there's no history to note.  If you pay it down before the next update cycle, the snapshot is forgotten (based on the regular FICO score and the regular credit report, let's ignore the trending products).  Some lenders could take adverse action if they happen to do a soft inquiry review of your report, other lenders may ignore a single account.  It's impossible to say.

Remember: your credit report is based on many chefs in this soup -- there's FICO, there's the bureau, there's the lenders themselves and then there's you (the least important part of the financial soup to the other parties).  All of them have their own bias as to why the credit report/score exists.

Some lenders use internal scores that you have little access to.  They may note you're overlimit on their internal records.  If you continue to stay high utilization, they may decide to CLD you or close accounts or do whatever their contract allows.

If you become a good manager of credit, this will just be a blip.  Pay it down and keep it down.  Learn when accounts report balances and make sure to make your payment BEFORE this day so your utilization is in one of these tiers, on just that one account:

1. Best: Reporting less than 8.9%
2. Pretty good: Reporting less than 28.9%
3. Average: Reporting less than 48.9%
4. Red flag: Reporting less than 68.9%
5. Danger zone: Reporting less than 88.9%
6. Maxed out: Reporting more than 88.9%
7. Overlimit: Reporting more than 100%

So if you can get your accounts to each report under 28.9%, do so.  You can use the credit limit to the maximum, but make sure you pay it down before it reports.  Also note that overlimit may cost you fees, and those fees could keep you overlimit if not paid off.

[danny4l]

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@Anonymous wrote:

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@danny4l wrote:

Interesting, now why was that so hard to find online?  All I needed to know was "temporary."  They make it seem like this is a bankruptcy of sorts.

---

The issue here is that there are many chefs in the soup and they all have different biases to what data you're seeing and why it's there.

The big thing to understand is that FICO isn't your score -- it's their score that they sell to lenders to gauge an individual's risk at the current snapshot in time.  If a lender pulls your report RIGHT NOW, FICO wants them to know that you're a poor manager of credit so that the lender can make a decision.  Being over limit means you not only used all the credit extended to you, but some more.  To lenders, that's a red flag that if they extend you credit, you may also go overlimit with them.  So it's a snapshot in time based on right now.

But because you haven't defaulted or paid late, there's no history to note.  If you pay it down before the next update cycle, the snapshot is forgotten (based on the regular FICO score and the regular credit report, let's ignore the trending products).  Some lenders could take adverse action if they happen to do a soft inquiry review of your report, other lenders may ignore a single account.  It's impossible to say.

Remember: your credit report is based on many chefs in this soup -- there's FICO, there's the bureau, there's the lenders themselves and then there's you (the least important part of the financial soup to the other parties).  All of them have their own bias as to why the credit report/score exists.

Some lenders use internal scores that you have little access to.  They may note you're overlimit on their internal records.  If you continue to stay high utilization, they may decide to CLD you or close accounts or do whatever their contract allows.

If you become a good manager of credit, this will just be a blip.  Pay it down and keep it down.  Learn when accounts report balances and make sure to make your payment BEFORE this day so your utilization is in one of these tiers, on just that one account:

1. Best: Reporting less than 8.9%
2. Pretty good: Reporting less than 28.9%
3. Average: Reporting less than 48.9%
4. Red flag: Reporting less than 68.9%
5. Danger zone: Reporting less than 88.9%
6. Maxed out: Reporting more than 88.9%
7. Overlimit: Reporting more than 100%

So if you can get your accounts to each report under 28.9%, do so.  You can use the credit limit to the maximum, but make sure you pay it down before it reports.  Also note that overlimit may cost you fees, and those fees could keep you overlimit if not paid off.

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Thanks, that was very helpful.  I have already paid down that particular card so are you saying that for the next cycle, while it will still show a high utilization, it won't be really highlighting the over-the-limit issue from the last cycle?

This card doesn't charge any over limit fees so I'm actually surprised I would get a report from my credit monitoring service stating that they are "reporting."

All learning experiences.

[Anonymous]

Credit monitoring services in general are based on their own organization's math, not on FICO's terms and policies.  Be aware that some credit monitoring services exist solely to push you on getting new credit so they make a commission.

Can I ask what monitoring service you use?

After paying it down below 100%, that warning should go away, but do note that being over 88.9% (once any interest posts) is still considered "maxed out" per FICO scoring, and by many lenders who may be reviewing your profile monthly.

Some lenders allow you to "force update" your balance -- Discover does for sure if you ask them in chat.  This can be useful if something big posts to your reports and you want to get it off your reports ASAP.  No idea which lender you're maxed out on but maybe they will update your balance on a manual request.

[RobertEG]

Yes, your scoring of % util of revolving credit is based only on your current balance and credit limits, and thus going over the limit is readily correctible score-wise by simply returning your  util to a lower level in the subsequent month.

However,that does not mean that you can always recover from high or over-the-limit utilization.

If you have repeated over-the limit situations or you remain over-the-limit for several months, that can trigger creditor reduction of your credit limit.  If that occurs, then as you pay down the debt, they may concurrently reduce your credit limit, thus keeping your % util at a high level.

I would not maintain % util at a high level for any extended periods, or have repeated high util situations.

That could trigger a credit limit decrease.......

[danny4l]

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@Anonymous wrote:

Credit monitoring services in general are based on their own organization's math, not on FICO's terms and policies.  Be aware that some credit monitoring services exist solely to push you on getting new credit so they make a commission.

Can I ask what monitoring service you use?

After paying it down below 100%, that warning should go away, but do note that being over 88.9% (once any interest posts) is still considered "maxed out" per FICO scoring, and by many lenders who may be reviewing your profile monthly.

Some lenders allow you to "force update" your balance -- Discover does for sure if you ask them in chat.  This can be useful if something big posts to your reports and you want to get it off your reports ASAP.  No idea which lender you're maxed out on but maybe they will update your balance on a manual request.

Yes, it is a Discover card and the monitoring service is Protech My ID by AAA.  I have credit monitoring through Capital One and Discover but I never got the same alert from them.  My score is all over the place with those three companies so I don't even go by that.

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