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Do credit limits affect your credit score?

A high credit limit may seem convenient, but too much credit can have a negative impact on your score.

Elizabeth Barry
Elizabeth Barry

Updated

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Your credit score is a numerical representation of your risk is a borrower. Credit providers use the information in your credit report, such as your credit limit, to determine your reliability and the risk they're taking on when they lend to you. Increasing or decreasing your credit limit can impact your credit score, which is another way lenders decide whether or not to approve your application.

You can use this guide to understand how your credit limit can impact your credit score and to order a copy of your report for free.

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How does my credit limit impact my credit score?

Your credit score is calculated by a credit reporting bureau using the information from your financial history, which includes your credit limits. Your credit report only contains the size of your credit limit, rather than how much of that limit you're actually using. If you're applying for a line of credit, the lender will review your report and consider your current and past credit limits (including any credit cards, mortgages or other loans).

Having too much unsecured debt (such as multiple credit cards) and high credit limits can lower your credit score. It could also result in declined credit applications, which would further hurt your score.

If you have a high credit limit that you're not using, you can contact your card issuer or lender to reduce your limit. This could help you increase your credit score and improve your chances of approval when you're applying for future loans.

What credit limit information is included in my credit report?

Since the comprehensive credit reforms were introduced in March 2014, information regarding your credit limits have been included in your credit report. Whether you have a personal loan, credit card or mortgage, the following credit limit details are included on your report:

  • The amount of credit you applied for (regardless of whether or not you're approved)
  • The current credit limit of the account
  • New and previous amount of credit

What is my credit score?

Your exact credit score may vary depending on which credit reporting bureau you order it from. For example, if you order your score through Experian for free with Finder it will be a number between 0 and 1,000. Whereas if you get your credit score from Equifax, it will be a number between 0 and 1,200.

Your credit limit is just one of the many factors that impacts your credit history and score. If you have multiple accounts with unused credit or high limits that you're not using, you could consider consolidating your debts or reducing your credit limit to improve your score. If you want to track credit history, you should order a copy of your credit report (which you can do for free with Finder) and check it regularly.

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10 Responses

  1. Default Gravatar
    venuJune 27, 2019

    Hi,

    I want to reduce my credit limit on credit card before applying for a loan. Will reducing the credit limit to half affect the loan application?

    Reply
    • Default Gravatar
      AshJune 28, 2019

      Hi Venu,

      Thank you for contacting Finder.

      Credit Limit do affects your Credit Score which is one of the factors that the Lenders consider in the approval/ rejection of your loan application. Credit Limit is one of the factors that affects your credit score. This then includes the size of your credit limit and how much of it are you able to use. If you have a high credit limit and is not able to use all of it, you may want to request for it to be lowered down as it can help improve your credit score and this increase your chance for loan approval.

      Remember that your Credit Score is just one of the factors that Lenders consider for your loan application. They will need to assess your over-all financial situation before making a decision regarding your loan request.

      I hope this helps.

      Please do not hesitate to reach out again if you have additional questions.

      Cheers,
      Ash

      Reply
  2. Default Gravatar
    ViMay 28, 2019

    Hi there,

    I’m just wondering if requesting a credit limit DECREASE would trigger a credit inquiry? I’ve just applied for an AMEX card and realised that its credit limit is much higher than what I would need. I haven’t used the card yet so nothing owing at the moment.

    Best regards,
    Vi

    Reply
    • Avatarfinder Customer Care
      FayeMay 29, 2019Staff

      Hi Vi,

      Thanks for getting in touch with finder.

      Increasing or decreasing your credit limit can impact your credit score, which is another way lenders decide whether or not to approve your application.
      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Faye

      Reply
  3. Default Gravatar
    davidNovember 21, 2018

    Hi I’m very confused why the ANZ bank has listed on my file for my credit card (the worst payment history) when I pay hundreds even thousands over my minimum payment amount due this is very disappointing to me

    Reply
    • Avatarfinder Customer Care
      JoshuaNovember 26, 2018Staff

      Hi David,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      I’m sorry to hear about your situation. It would be a good idea to directly get in touch with ANZ bank and see if this is an error on their part. Another thing you can do is get in touch with credit reporting bureaus to know how to further correct their error.

      You may also want to read our guide, “What to do about a mistake on your credit file.”

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

      Reply
  4. Default Gravatar
    RoyAugust 16, 2018

    Can I remove old credit enquiries?

    Reply
    • Default Gravatar
      JoelAugust 16, 2018

      Hi Roy,

      Thanks for leaving a question on finder.

      You can’t remove a legitimate inquiry from your credit report. The only inquires that can be removed from your credit report are those that are incorrect or erroneous, like if a lender made a hard pull on your credit without proper authorization from you. In these cases, you can submit a request to have the inaccurate details removed from your report.

      For a legit credit inquiry, you’ll simply have to wait two years to have a hard inquiry taken off your credit report — though it’ll only impact your credit score a year at most. On the other hand, a soft pull on your credit can only be seen by you and has no affect on your credit score.

      Cheers,
      Joel

      Reply
  5. Default Gravatar
    duncanJune 28, 2018

    How does closing a credit card possibly negatively affect my credit score?

    Reply
    • Avatarfinder Customer Care
      JeniJune 28, 2018Staff

      Hi Duncan,

      Thank you for getting in touch with finder.

      Some people cut up their credit cards thinking it will improve their credit score. But that’s not always the case, although there can be other benefits for your personal finances. Having five credit cards, for example, makes no difference to your credit score, providing you’re making all your payments on time. Closing one, providing there’s no outstanding debt, usually won’t harm your score.

      Closing an account could impact your credit score because you’re losing the credit limit attached to that account. If you have balances on other accounts, the closing of an account could increase your credit utilization ratio because it will cause you to have less available credit overall.

      Closing a credit card account you’ve had for a long time can also impact your credit score because you will lose the associated history with the card. The length of your credit history makes up 5 percent to 7 percent of your Equifax credit score.

      I hope this helps.

      Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

      Reply
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