finder.com.au
NEW! Download App

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.

Avatar
Elizabeth Barry
Updated . What changed?
Fact checked

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

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.

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.

Credit score in the Finder app

Want a better way to check your credit score?

Banks know your credit score, so why shouldn't you? The Finder app updates your score automatically each month and lets you know if it changes. Pop in your phone number below to get your download link.

By submitting your phone number, you agree to the Finder privacy policy and terms of use

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.

Free credit score & report

Lenders know your credit score, so why shouldn't you?

Get your credit score and comprehensive report now!

Image: Shutterstock

More guides on Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

10 Responses

    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
    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
    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 about mistake on credit file and how to fix it.

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

      Have a wonderful day!

      Cheers,
      Joshua

      Reply
    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
    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
Go to site