How Highlimit Credit Cards Boost Your Credit Score
It’s true; highlimit credit cards can boost your credit score!
There are more reasons to get a highlimit credit card than simply being able to rack up a ridiculous amount of debt. In fact the limit of your credit card can have a significant impact on your average fico score. This is because the ratio of your outstanding balances to your available credit is one of the factors used by the credit bureaus to determine your credit score. Therefore if there are two individuals with the same amount owing on their credit card but one has a higher limit than the other, all other things being equal, that person will have a higher fico score.
No one knows for sure what the tipping point is for balance owing vs. credit limit, but obviously the smaller the percentage owing the better. This is a good reason to apply for the highest limit credit card you can get. This assumes that you possess the self control to be responsible with that much borrowing power readily available. If you feel that you would tend to spend beyond your means, then this strategy for lowering your fico score would definitely not be a good idea.
As a reminder, the higher credit score you have the lower interest rates you will be eligible for. Anyone looking for debt relief will want ensure they are paying as little in interest as possible so that they can have the majority of their monthly payment go to the principal.
Of course having highlimit credit cards has its own rewards, including the ability to purchase big ticket items on the spot, without first having to go to your bank to apply for a loan. See the perfect deal on a vehicle you have been looking for? You can pay for it in full on the credit card and then determine afterwards, the most cost-effective way to structure the financing.
Also be aware that some lenders take into account the maximum credit that you have available when you are applying for a loan, so if you have a credit card with a really high limit it could inhibit the amount that you can qualify to borrow later on. So you want to find the right balance between a high enough limit that you won’t like utilize a large percentage of it, but low enough that it won’t get in the way of being approve for other loans later on.
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