I just checked my credit reports and I have several items where the high credit is above the credit limit. Like many people, I had credit lines slashed during the credit crunch in late 2008. I didn’t check my credit scores, since I was using the free annunal credit report service.
Does this hurt my FICO or whatever score lenders might use? Also, how bad is this likely to look to any potential mortgage lenders in the future?
High Credit is the maximum amount a lender will allow to an individual or business.
I don’t do credit reports; I just work with the data that go into them. FICO scores are pretty much a ‘black box’ thing. They keep the methodology close. So either high credit is a good thing (‘This guy looks like a good risk, since business are willing to loan him that much.’) or it’s a bad thing (‘Look at how far he can go into debt! What if he uses all of his credit at once?’).
If they lowered your credit limit and that put you over the limit, they should have given you written warning (and I know they did this) exactly how they were changing.
If the way they changed it was too allow the overage without it generating late or no pay as long as you don’t use the card (which is my guess) until the credit limit is either upped or the balance on the card is under it, you should be fine. Just don’t use the card.
Well, credit utilization DOES impact one’s FICO score.
cite.
So these changes may well have affected dalej42’s FICO. How much, we don’t know of course, since there are obviously a lot of other factors including account longevity, history of paying on time, etc.
I disagree. Credit Limit refers to the amount the lender will allow you to borrow. High Credit to me refers to the highest amount you have borrowed.
Some lenders (notoriously Crapital One) will report the latter as if it were the former - making it look like you were right at your credit limit. There’s speculation that they did this deliberately to make their customers look like worse credit risks and to make it harder for them to get credit elsewhere.
cite on their former reporting practices - sounds like they’re changing this though.
One mention of the intentionality of such reporting.
See what I get when I post while I’m trying to work?
I believe my definition is correct. But in practice (going by the data I work on), you are also correct.
One of the purposes of the High Credit number is to see if you’ve been able to pay balances down.
For example: Credit limit: 10,000, High Credit: 0, Current Balance: 0 means a card you acquired, but never used. So you have potential credit, but have not proven that you can pay it down.
Another example: Credit limit: 10,000, High Credit: 5,000, Current Balance 0 means that you could have charged a lot more, but you did get your balance up to $5,000 at one point. The fact that you paid it off (as indicated by the current balance of $0) shows that you have been able to pay down balances in the past.
Another example: Credit limit: 10,000, High Credit: 5,000, Current Balance: 5,000 would mean that you haven’t maxxed the card out yet, but that you might be on your way to doing so because your balance is current the highest it has ever been.
The actual credit calculations are black boxes, but (all other things being equal), the second example here is the best for your credit score. You have a low utilization ratio and have proven that you can pay down balances.