How does credit card limit impact credit score

[lawyered07]

I only have one credit card with a limit of 1000. It's a sainsburys cmbank card and I only really use it mostly at sainsburys for nectar points as we shopped there anyway.

I am potentially looking to take a smallish personal loan out (8-10k) in a couple months and checking my credit score it plummets when the balance on the credit card is above 600ish. It gets cleared every month but my question is would it be better increasing the credit limit so usage is more like 20-30% of limit at the most each month? Would that help my score?

I cant see it being a problem to increase, I just have a low limit because I dont use it much.

Thanks

[VR99]

A few years back I had a £9k limit on my cc..I was also around 60/70% utilisation but it didn't seem to impact my credit score...roll forward a few years the limit has been quietly lowered by my bank without me realising and I've made efforts to bring down my overall debt(albeit 0%) but it appears to of negatively impacted my credit score as I am now hitting a higher utilisation due to the lower limit.
There is no guarantee on what limit I would get on a new cc so will bring my utilisation down before applying for a 0% transfer cc.

[alistair1234]

I was always told that the bigger the limits that were unutilised, the better for your credit score, rather than having a small limit as it looks like you are using a lot of your limit.

[Sarnie]

lawyered07 said:

I only have one credit card with a limit of 1000. It's a sainsburys cmbank card and I only really use it mostly at sainsburys for nectar points as we shopped there anyway.

I am potentially looking to take a smallish personal loan out (8-10k) in a couple months and checking my credit score it plummets when the balance on the credit card is above 600ish. It gets cleared every month but my question is would it be better increasing the credit limit so usage is more like 20-30% of limit at the most each month? Would that help my score?

I cant see it being a problem to increase, I just have a low limit because I dont use it much.

Thanks

Credit utilisation affects your credit score, not the credit limit. your score will increase if you increase the limit and are therefore using less of the overall credit available to you.....

[theboss]

25% seems to be a threshold based on my observations recently - I’ve been subscribed to all the agencies own services and monitoring obsessively whilst doing some post-divorce credit file cleaning and Experian openly advise you to keep credit card balances under 25% of limit both individually and as an aggregate.

If you can get the limit raised 300-400% that will certainly help providing your usage remains low.

Expect it to take a few months to update....

[LosingGrip]

I had a limit of £2,500 and reduced it to £1,400 when I paid a load off.

Im near the limit for one (0% interest and paying the minimum payment off each month whilst I pay the other one off first. The other has around £400 of £500 used.

My credit score was 940ish before I reduced it. It's now 300 and something. I did also open a couple of new accounts to get a switch deal though.

[devnull]

LosingGrip said:

I had a limit of £2,500 and reduced it to £1,400 when I paid a load off.

Im near the limit for one (0% interest and paying the minimum payment off each month whilst I pay the other one off first. The other has around £400 of £500 used.

My credit score was 940ish before I reduced it. It's now 300 and something. I did also open a couple of new accounts to get a switch deal though.

It will be your accounts that affect the credit score. When I did some house keeping on my accounts and opened a joint with the wife, my Experian score took a hammered for a few months.

[craigjm]

Utilisation not limit is what impacts on your credit score. A utilisation of less than 25% is viewed as very normal whereas at the other end any usage over 80% is seen as a real negative.

Don’t forget that your credit score will only be a factor in a lending decision. Your affordability for the loan will be most important.

[Munter]

Basically. Don't worry about it. When you rock up with bank statements showing you have say £500 free cash every month, and you want a loan to repay at £100 a month. There is unlikely to be an issue.

When business travel was allowed, I would get a "credit score change warning" every month. First month. OMG the balance on the card is high (travel happened). Next month. OMG the balance on the card is low (it got payed off). The scoring system just isn't setup to understand cards that get paid off each month, and have a limit that's near what's likely to be required. It's setup to cope with massive limit, consistent balance, never really get's paid off.

[lawyered07]

thanks for the replies.

annoying utilisation is the consideration. i think i will either up it, or just not use it for a month before. otherwise i will forget to manually clear it if needed.

affordability shouldnt be an issue (managing to save much more each month than what the repayments would be), but i want the best rate i can get. i dont really want something within my control causing a higher interest rate.

[craigjm]

Another thing that impacts the score is the number of applications in a rolling period so if you’re looking at taking out a loan don’t increase the limit on your credit card beforehand as this application will lower the score in the short term

[lawyered07]

craigjm said:

Another thing that impacts the score is the number of applications in a rolling period so if you’re looking at taking out a loan don’t increase the limit on your credit card beforehand as this application will lower the score in the short term

Good point. Any idea what time frame they look at? I would be wanting the loan in march probably

[craigjm]

lawyered07 said:

craigjm said:

Another thing that impacts the score is the number of applications in a rolling period so if you’re looking at taking out a loan don’t increase the limit on your credit card beforehand as this application will lower the score in the short term

Good point. Any idea what time frame they look at? I would be wanting the loan in march probably

Within three months it has a big impact and gradually tails off over six months.