Does a High Credit Limit Equal a High Credit Score?

Many have wondered whether credit scores and a high credit limit are related, and are surprised to learn that they are. But how do they work in conjunction and affect one another?

Here are a few ways:

    • The credit utilization ratio. This ratio basically looks at the balance of your available credit with the amount of debt you have to determine 30% of your FICO score. In short, if you have a high credit limit, then your credit utilization ratio will lower, which raises your FICO score. So if you’re looking for a higher FICO score, asking for your limit to be raised a good route to take.

  • The credit inquiry. On the other hand, if you apply for credit often in hopes of raising your credit score, you may be disappointed to learn that with each application comes a new inquiry, and with each inquiry comes a lowering of your score temporarily. To avoid your inquiries causing this problem, you can make all of your inquiries within the same 14-day period. If you do this, they will be grouped together and counted as one inquiry.
  • Irresponsible behavior. Another way that credit scores can be affected is through your irresponsible financial behavior. If you make charges without paying off your balances, you are likely to have your high credit limit reduced in a hurry. Of course, if this happens, you will see your FICO score reduce for two reasons – past-due accounts and your credit utilization ratio raising.

Having a high credit limit can definitely have a positive effect on credit scores. So to take advantage of this benefit, it’s important to make responsible financial choices with your credit to avoid having your limits lowered, along with your FICO score.