The impact on credit scores when you exceed your credit limit

Dear Experian,

Will going over the credit limit on a credit card affect my credit negatively, even if the creditor does not charge a fee?



Dear CHO,

Sometimes life happens and you can’t avoid going over the limit. If it is a one-time event and you quickly pay your balance so that it is well below the limit, it may have little or no impact on your credit report.

However, if you are staying close to the top of your limit and regularly going over the limit, your creditworthiness definitely will suffer. Plus, you will likely be paying more to use credit now and in the future.

You decide how you use your credit cards, and you suffer the consequences if your decisions abuse the privilege of using those cards. Exceeding your credit limit is abusing that privilege.

One of the consequences of doing so may be charging an over-the-limit fee. Another fairly common result is that the lender may increase your interest rate.

Raising the cost of using your credit card through fees and interest rate increases will make it more financially painful to use the card, which should cause you to use it less until you reduce your debt. And, it compensates the creditor for losses from people who are possibly over-extended and end up not paying at all.

Over-the-limit fees charged by your creditor and increased interest rates are not reported as part of your account history so have no direct impact on your credit report or credit scores.

However, your credit limit and current balance both will appear on your credit report. Your credit report will show clearly that you have exceeded your credit limit or are charging all that your card allows. Credit scores weigh your balances as they compare to your limits, so will be affected negatively.

If you applied for new credit, you would likely be charged a higher interest rate because “charging to the max” has proven to be a sign of high risk.

The best thing you can do now is stop using the credit card and start paying down the balance. As the balance decreases, your credit report will be updated and your credit scores will improve over time.

Thanks for asking.

- The “Ask Experian” team

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