Is it possible to have a credit limit that is too high?


Consumers trying to improve their credit scores are often advised to increase the credit limit on their credit cards. A key factor in your score on credit report to your utilization of the loan, which takes into account how much of all available credit to use. If the ratio of debt to credit is lower than the result for this part of the credit report above. While having a higher credit limit can increase your credit score, be careful when raising credit limits.

The most obvious reason to avoid too much credit available that you could spend more, increasing the debt and actually hurt your credit score if you get in over your head. Think carefully about whether you can resist the temptations that can come with having a higher credit limit.

The credit limit that is too high may affect your ability to get new credit. When the lender reviews your credit report and compares the amount of the loan with your income, having a credit limit higher than your income can support is a red flag to the credit analyst. If You go to a Bank for a loan of 20,000$, for example, and available credit of $75,000 but the income of $ 50,000, the lender sees this as a risk. If a Bank loans $20,000, you could theoretically max out Your credit card and be able to perform all of its obligations. In this case, it is advisable to use some of the existing credit or reduce the credit limit to a more reasonable level.

(See: 6 benefits of increasing Your credit limit.)

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