Does a higher limit = better score?

[Anonymous]

Does more available credit increase a credit score assuming all other factors are the same. Example: I have $5900 of available credit over 5 cards currently sitting at 5% utilization. Would $50000 available credit over 5 cards sitting at 5% utilization give me a higher score?

Edited for clarification

[Anonymous]

I don't think limit has any direct impact, but indirectly it impacts your utilization.

For example, when my Amazon card first opened it had a $500 limit. If I bought $300 worth of stuff my utilization on that card was 60% and that definitely hurt my score. Now that the card has a $5000 limit that same purchase is only 6% utilization.

But if I bought $3000 worth on my $5000 card that would have the same result as $300 on a $500 card.

[Anonymous]

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@Anonymous wrote:
Does more available credit increase a credit score assuming all other factors are the same. Example: I have $5900 over 5 cards at 5% utilization. Would $5000 over 5 cards at 5% utilization give me a higher score?

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I am confused by your question.... 5900 over 5 cards at 5% is a total line of 118K, 5000 over 5 cards at 5% is a total line of 100K. So how will less available credit / smaller total credit causea higher score when is is not  "more available credit"? What do you mean by More available credit in your question?

[Anonymous]

Bottom line get as high a limit as possible on your cards to reduce the ratio of UTI on them..

[Anonymous]

I agree with Starz.  The concrete example that the OP gives is intended to illuminate his question.  But it actually confuses more than it clarifies, since it it is an example of a LOWER credit limit rather than a higher.

Also, there may be a misunderstanding with what the term "available credit" means.  The OP may be intending to mean credit limit, but it actually means the difference between ones current CC debt and one's credit limit.

I like the OP's idea of using examples.  Is this what he is driving at?  (See below.)  If not, can he change the example?

Suppose we have two people, Bob and Rick.  Bob has four cards with credit limits of 1k each.  Rick has four cards with limits of $10k each.  Both guys have a CC utilization of 5% and their credit profiles are otherwise identical.

Will Rick have a higher score than Bob, since Rick's credit limits are much higher?

[Anonymous]

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@Anonymous wrote:

I agree with Starz.  The concrete example that the OP gives is intended to illuminate his question.  But it actually confuses more than it clarifies, since it it is an example of a LOWER credit limit rather than a higher.

Also, there may be a misunderstanding with what the term "available credit" means.  The OP may be intending to mean credit limit, but it actually means the difference between ones current CC debt and one's credit limit.

I like the OP's idea of using examples.  Is this what he is driving at?  (See below.)  If not, can he change the example?

Suppose we have two people, Bob and Rick.  Bob has four cards with credit limits of 1k each.  Rick has four cards with limits of $10k each.  Both guys have a CC utilization of 5% and their credit profiles are otherwise identical.

Will Rick have a higher score than Bob, since Rick's credit limits are much higher?

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Sorry, I was not subscribed so I didn't see the replies. I edited my original post to be more clear hopefully.

[Anonymous]

Thanks.  I thought that this was what you are driving at.

The answer is no: Big credit limits do not in themselves give you a bigger FICO score than small credit limits, assuming that the utilization stays the same.

[Anonymous]

It doesn't affect your score per se(other than utilization percentage) but it does affect how much money others are willing to lend you. Ie.if a CC company sees another company giving you a high limit(say 25 or 50k) then others will likely follow suit.(not in all cases but in a good portion(amex does this)

[Anonymous]

Good point, Chad.  There are many reasons to pursue higher credit limits.  You mention one and you are right.  Two other factors, however, matter more to a credit card company, when they are giving you a new card.  Namely, your income and your credit score.  Having high CLs doesn't help you with either of those.  But if you bear that in mind, then you are no doubt right.  To illustrate Chad's point, suppose you have two guys, Bob and Carl, and they both have a 70k income, a 770 FICO score, four credit cards, and have a 5% utilization.  Bob has four CLs of 1k each.  But Carl has at least one CL that is 20k.  If both guys apply for the same Barclays card (and neither has a card with Barclays), then Carl has a better chance of getting a bigger CL than does Bob.

There are other reasons to look for bigger CLs over time.  Certain industries (such as the insurance industry) look at how big your average credit limit is for your cards.  Higher is better -- if you have a low average CL then Geico, State Farm, etc. have a small chance of charging you more for car insurance.

Convenience is another obvious reason.  It's easier to buy things and not have to remember to pay the balance down before the card reports to the bureaus.

It's even possible that a scoring model like Vantage takes average CL into account.  (I don't know.)

So there are certainly reasons.  It's just that improving your FICO score, which rightly dominates most people's thinking here, is not one of them.  So the best way to think about credit limit increases (CLIs) is that you should gradually work on them over time, but in a relaxed unhurried way, and where you make sure that the issuer is doing a soft pull rather than a hard one.

PS.  I am going to go out on a limb here, and this is just my opinion. I think I should say that one common but terribly misguided reason to want CLIs is to lower your utilization.  If you can't lower your utilization to 1-5% in the space of a month or two, then you are in trouble financially, skating on credit cards to buy stuff.  That is the concern such a person should be addressing, not his utilization % per se.

[Thomas_Thumb]

It also can potentially affect insurance premiums.

Credit based insurance scores (CBIS) from LexisNexis and TransUnion do consider average credit limit as a factor in scoring.