High Balance versus Credit Limit, Do I care?

[JJF]

How does the relationship between High Balance and Credit Limit impact Fico Scoring?

My wife and I have no joint credit.  On selected accounts she is an AU on my accounts.  I am not an AU on any of her accounts. 

My wife has two accounts were the age of her account is far greater than the average age of my accounts.

The plan is to be added as an AU to these accounts.  However, I am concerned about the relationship between high balance and credit limit.

Since she was not using the card, Citibank cut the credit limit to $300 from $1600.  Her high balance  now reports $1400 more than her credit limit.

Before I get added as an AU (in orde r to take advantage of the account age), I want to make sure this high balance - credit limit difference doesn't negatively impact my Fico scoring.

Thanks.

Message Edited by JJF on 03-27-2009 11:09 AM

[haulingthescoreup]

It would most definitely affect your FICO scores. What you're describing is called "high util" (for utilization), and $1400/$1600 = 87.5%, which is pretty much maxed-out.

For AU cards, you want them to be:

-- older than your average age of accounts (AAoA)
-- paid down to 9% util, max, preferably reporting a $0 balance
-- squeaky clean, no baddies at all

For both your sakes, she needs to get those paid down.

[CreditAble]

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@JJF wrote:

How does the relationship between High Balance and Credit Limit impact Fico Scoring?

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It doesn't affect FICO scoring at all.

It is the current balance that is used for the purpose of computing utilization.

The only time high balance effects the FICO score is if the credit limit does not report. In that case the "High Balance" (most ever borrowed) is treated as the credit limit. Then the high balance is factored into utility as a substitute for the credit limit.

Many people have high balances that are higher than their credit limits. When one combines credit limits to increase CLs on one card there is frequently a small limit left on the other card.

The new low credit limit on the "junior" card is frequently (a lot) lower than the high balance that had once been charged on that card. If there would be a negative FICO score impact, people would not combine balances to raise the CLs on one card, since the other card's reduced CL (below the High Balance)  would hurt the FICO score.

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@JJF wrote:

My wife has two accounts were the age of her account is far greater than the average age of my accounts.

The plan is to be added as an AU to these accounts.  However, I am concerned about the relationship between high balance and credit limit.

Before I get added as an AU (in order r to take advantage of the account age), I want to make sure this high balance - credit limit difference doesn't negatively impact my Fico scoring.

Thanks.

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It will not hurt you at all. Go for it.

[JJF]

Thanks to all. I will add the card.

Message Edited by JJF on 03-27-2009 11:21 AM