Credit card question, about credit limit

[TallBill]

My USAA card is at 6.9% with a credit limit of $23,000. I've never carried a balance, so the limit doesn't really matter.

But how does the credit limit affect my credit score? If they raised it to $30k would it matter? At what point does it become pointless to increase?

Just curious because my credit still isn't amazing and I can't figure why. I've paid every bill that I've ever had in full and on time or ahead of time.

 

[Vehemence]

Something like available credit to how in debt you are ratio. I'll just step on out of here.

 

[Adam8281]

My USAA card has 4.5% interest - you might want to ask to get yours lowered. Although I guess it doesn't matter since you don't carry a balance (neither do I).

 

[OCGuy]

Balance V Limit is all that matters. Most say keep it under 30%, and it starts to hurt you above 50%.

 

[TallBill]

Originally posted by: dNor
Something like available credit to how in debt you are ratio. I'll just step on out of here.

So actually raising my available credit would be a good thing then? My wife has $11k of school loans @ 2.5% and we together have a $8k car loan @ 6%.

Our only other credit card has a $7k limit. So on paper, we're using up 40% of our available credit.

I have a USAA mastercard, perhaps I'll apply for the USAA AMEX card as well.

 

[kranky]

how your FICO score is calculated.

 

[TallBill]

Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)

Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

So it looks like raising my limit now or getting another card at $20k will help me in the long run even if I take a hit on new credit right now.

 

[Ns1]

Originally posted by: TallBill

Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)

Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

So it looks like raising my limit now or getting another card at $20k will help me in the long run even if I take a hit on new credit right now.

Yes, but the FICO rules have changed/are changing, so this info might be out of date.

Under the OLD system, part of your score was balance/available credit ratio, so having tons of open credit helped your score.

 

[Tweak155]

Originally posted by: Adam8281
My USAA card has 4.5% interest - you might want to ask to get yours lowered. Although I guess it doesn't matter since you don't carry a balance (neither do I).

Dang I need that interest rate. Transfer my 5.9% over.

 

[dullard]

People can usually estimate their credit score fairly accurately by taking an honest look at themselves. The FICO link above is also necessary.

35% Payment history. Is every account paid in full and on time, every time? If not, change your behavior and wait. If you pay on time and in full, companies should trust you more than someone who doesn't (remember the credit score is a measure of trust and nothing else). This part is usually well-understood.

15% Length of credit history. Only time can affect this. If you have no history or a short history, you'll be harmed. About the only thing you can do is to make certain that you use your old accounts on occasion. Having an old credit card means a company has trusted you for years. But it means a lot less if you haven't actually used it recently.

10% New credit. Don't go on an app-o-rama spree and you will probably ace this section. But also, being afraid to ever open an account can also hurt you. They like it if you show that you are still active and interested in credit (ie do you trust yourself?).

10% Types of credit used. Here is where people hurt themselves without knowing it. Is that USAA card your only card? If so, you have harmed your score here. The optimal score is to have a good mix - which means two or three credit cards in use. Also, to maximize it you need a mortgage, a retail account or two, and/or installment loans (auto or student for example). Avoiding debt just means that you don't trust yourself. Thus, your credit score should be lower since companies shouldn't trust you either.

30% Amounts owed. Here is the question that you asked about. The formulas are changing, but you are probably good if you use less than 30% of your available credit. That is, you have lots of cushion room left if you get into bad times. But this also applies to other loans. Is your car loan mostly paid or mostly unpaid? Same goes with the mortgage. You need to show that you have at least one credit card with $0 balance. But you shouldn't have all with $0 balance. Note: you can pay it off in full and still not have a $0 balance if you charge something else the next cycle.