A high credit limit may seem convenient, but too much credit can have a negative impact on your score.
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.
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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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
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
Can I remove old credit enquiries?
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
How does closing a credit card possibly negatively affect my credit score?
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