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hdporter
Posts: 56
Registered: ‎03-30-2007
Scoring of "no preset limit" credit cards
I've never seen a good explanation of how inclusion of "no preset limit" on your credit report impacts your credit score ... specifically when it comes to the credit utilization factor. Many of these cards have a credit line assigned, but not a limit. You're allowed to charge in excess of the assigned line -- but must pay it back down below the line before the next billing statement. Consequently, the issuers don't consider these to have a fixed limit and often don't report a limit to the CRA's. The only thing that is recorded is historical high balance. In the case of standard revolving credit cards with a limit, it's commonly discussed that failure of the issuer to report a limit can impair your score because utilization is otherwise calculated using the high balance, which often is lower than the actual limit. It would be expected that when a "no preset limit" card is reported as type "Revolving", failure to report a limit would have a similar impact on scoring. However, I've seen these cards reported with a type of "Open" or "Flexible Spending". Are these scored similarly? Or, because they're being specifically disclosed as having different terms re limits, are these excuded from the utilization factor? ... in this latter case, presumably charging the card up to 90% of the unstated line would have no different impact than 10%, no matter what the reported historical high balance. (As a side note, I've seen utility accounts reported as account type "Open" - not to be confused with having an Open vs. closed status - and there's little doubt that these aren't factored as part of the utilization component of scoring. Finally, some issuers will update the CRA tradeline to report a limit upon your request. Assuming that the card is still reflected as type "Open", does this change how the account is scored (particularly if, as may be the case in the last example, the card should otherwise excluded from utilization scoring)? Accurate information would allay much of the concern of some who fear that these types of accounts are likely to penalize their credit score.

Starting Score 1/01/10: TU:768 EQ:770
Current Score 8/21/12: TU:776 EQ:779
Goal Score 12/31/10: . TU:800 EQ:800


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