Question on why this would cause my credit score to drop

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Smerri
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Question on why this would cause my credit score to drop

Postby Smerri » Sat Nov 06, 2010 9:53 am

I have the Bank of America Visa Signature card. I opened it a month ago and it has a $10,000 limit, however I have read on here that technically Visa Signature has no preset spending limit. On my online banking account it says credit limit: $10,000 and when I opened it I was told my limit was $10,000. First off is there any way to get that limit to report to the credit bureaus instead of having the blank line there for credit limit.

Secondly, my bill for my Visa this month is $345. The statement closed two days ago, the $345 balance went to the credit report, and I just paid it off. However, when I went into my CreditSecure on my AmEx account, my Experian and Equifax had dropped (the two that actually have the balance on my Visa) and under the reasons of it saying why your score may be low this is a reason that just showed up
At least 1 or more of your accounts has a balance that is close to your credit limit, which may be lowering your score. When your balance is high, this can indicate to lenders that you are likely to overextend yourself.

Why would this suddenly show up when a $345 balance is added to an account with a $10,000 limit or in the case of the credit report no limit?


jeffysdad
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Postby jeffysdad » Sat Nov 06, 2010 3:28 pm

That does seem odd. I have read several posts on here that say Signature cards do not report credit limits to the bureaus. I think I also read that in lieu of a credit limit, what actually gets recorded is the highest historical balance on the Signature Account. In this case the amount would be $345, your first and only, so far, balance.

So I'm GUESSING the credit bureau's algorithm is calculating your score as if $345 -- or some number close to it -- is your credit limit on this Signature account. I doubt there is anything you could do to intervene in this, and it's almost certainly not worth your effort.

I suspect that as you use the card the "credit limit" will keep getting bumped up at the credit bureau to whatever your historical high balance is at the time.

I have several Visa cards, all of them are Signature cards. I've never experienced anything like this myself, but maybe I just haven't noticed or checked my credit report/score at the right time.

As long as you're not applying for a car loan or mortgage and your credit score is at least good, I wouldn't worry about this. It seems like a "problem" that will fix itself.
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infomaniac
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Postby infomaniac » Sun Nov 07, 2010 4:57 pm

Charge a big purchase for thousands of dollars and return it the next billing cycle. Then the no-preset limit will show it from that point onward.

Smerri
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Postby Smerri » Mon Nov 08, 2010 9:42 am

infomaniac wrote:Charge a big purchase for thousands of dollars and return it the next billing cycle. Then the no-preset limit will show it from that point onward.


That's actually an interesting idea.

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Mogul of Pineapples
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Postby Mogul of Pineapples » Wed Nov 10, 2010 2:11 am

That should work and it would be better to do that sooner than later. Otherwise you will have month after month charging close to your credit line. You need one big month to raise the limit substantially higher to stop that problem from happening over and over.
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