Can being over the limit on a CC affect CR?

money_talks · ‎04-29-2015

Let's say you are paying the minimum amount due every month for your credit card on time but due to a high balance on your card and high interest rate, you are over the limit every month on your statement. Basically the interest you are paying every month is higher than your minimum payment and your balance is approaching the credit limit.

Can this example lead to any derogatory/negative marks on your credit report that could stay there for 7 years? Or would someone not have to worry about the CR as long as they are making the minimum payment every month?

gdale6 · ‎04-29-2015

@money_talks wrote:
Let's say you are paying the minimum amount due every month for your credit card on time but due to a high balance on your card and high interest rate, you are over the limit every month on your statement. Basically the interest you are paying every month is higher than your minimum payment and your balance is approaching the credit limit.

Can this example lead to any derogatory/negative marks on your credit report that could stay there for 7 years? Or would someone not have to worry about the CR as long as they are making the minimum payment every month? There is no derog reporting per se but Fico gives you quite a Ding for anything over 89% of CL used, the creditor would most likely cancel the account if it remained over the limit and balance increasing M/M for very long. Other creditors would not view it in good light either and might lead to AA from them. I do believe the Card Act closed out a creditors ability to even grant such an account anymore.

CH-7-Mission-Accomplished · ‎04-29-2015

Also lenders aren't alowed to have a minimum payment due less than the interest accruing on a credit card loan. (Remember neg am mortgage loans?)

money_talks · ‎04-29-2015

@gdale6 wrote:
@money_talks wrote:
Let's say you are paying the minimum amount due every month for your credit card on time but due to a high balance on your card and high interest rate, you are over the limit every month on your statement. Basically the interest you are paying every month is higher than your minimum payment and your balance is approaching the credit limit.

Can this example lead to any derogatory/negative marks on your credit report that could stay there for 7 years? Or would someone not have to worry about the CR as long as they are making the minimum payment every month? There is no derog reporting per se but Fico gives you quite a Ding for anything over 89% of CL used, the creditor would most likely cancel the account if it remained over the limit and balance increasing M/M for very long. Other creditors would not view it in good light either and might lead to AA from them. I do believe the Card Act closed out a creditors ability to even grant such an account anymore.

gdale6: That FICO ding for being over 89% of CL used is temporary though, and once you bring your balance down your FICO should recover immediately from what I understand.Your point about the creditor closing the account without notice does sound scary, either the main creditor or your other creditors closing their accounts because they might fear you will fall behind with them as well. If that were to happen, that itself is not a derogatory mark on your CR or is it? At first, the account would be closed and will have an outstanding balance along with a note "Closed by creditor". Once you pay down the balance to $0, this closed account will now have a $0 balance and all it should say is "Closed by creditor". Other creditors looking at your report after it has been paid off won't know the exact reason why it was closed, correct? They might be concerned for sure though.

@CH-7-Mission-Accomplished wrote:
Also lenders aren't alowed to have a minimum payment due less than the interest accruing on a credit card loan. (Remember neg am mortgage loans?)
CH-7-Rebuilding: That makes sense then. I think what I meant was making the minimum payment, then making purchases with the card prior to the statement date, and doing this every month consecutively for a while.

RobertEG · ‎04-29-2015

Your credit file stores the balance history, though it is not included in commercial credit reports. Only current balance, credit limit, and minimum payment are routinely shown in commecial credit reports.

However, if one were to obtain a detaled report that showed prior balance history, it might impact any manual review.

The creditor for the card carrying the balance certainly maintains hitory of your monthly balance vs credit limit in addition to delinquency history, and may use any extended period of high util to reduce your credit limit as the debt is paid down. That could prevent you from reducing your % util as the debt is reduced.

If your balance goes over the limit, your accunt agreement will most likely permit assessment of over the limit fees, and thus additionally increase account balance.

Can being voer the limit affect your credit report? Indirectly, yes, it can have impact.

Anonymous · ‎04-29-2015

I was going to say that may be why you're going over the limit every month. You might be paying the minimum which is not enough to offset your over the limit fee from the first time thus it will just keep going & going until someone does somehting about it. I would look into it & see what it would take to get that down below your limit and like others said, try to keep you utilizaiton below the 89% mark. When things get better, get a secured card from a reputable place, Cap One, BofA & that will take some of the utilization off of your other card.