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Credit Card Basics

Does Going Over My Credit Limit Affect My Credit Score?

Although it's possible to go over your credit card's limit, it's not recommended when you want to create and preserve excellent credit scores. Exceeding that limit affects your credit utilization ratio, which measures how much of your available revolving credit you're using. To keep your credit scores high, your credit utilization should stay low.

Technically, a credit limit is the maximum amount you can charge on a credit card. But you can go over that limit in some circumstances. If you do, prepare for repercussions, including a lower credit score and credit card fees. Then take action to repair the damage and avoid going over in the future.

Going Over Your Credit Limit May Affect Your Credit Score

Credit utilization is one of the top two influential factors in the most commonly used consumer credit scoring models—those from FICO® and VantageScore®. These scoring models consider both overall credit utilization—how much of your total available credit you're using—and utilization per credit card, which is the percentage of available credit you're using on a single card, when determining your credit scores.

It's best to keep your credit utilization ratio, both overall and on individual credit cards, under 30% to avoid seriously impacting your credit scores. So, for example, if you have three credit cards that together allow you to borrow a total of $10,000 and your combined debt is less than $3,000, you're in a fine position. And if you have a card with a $1,000 credit limit, keeping your balance under $300 is best. The less you owe, the better for your scores.

Using credit cards and paying off your balances every month or keeping balances very low shows financial responsibility. Maxing out your credit cards and even going over your credit limit, however, is an indication that you may be struggling financially. That can lower your credit scores and make it more challenging to get approved for other forms of credit.

To credit scoring models and lenders, going over your credit limit is a red flag. More, exceeding your credit card's limit can put your account into default. If that happens, it will be noted on your credit report and be negatively factored into your credit score.

What Happens When You Go Over Your Credit Limit?

Depending on your credit card issuer, going over your credit limit will produce different outcomes. For example:

  • Declined transaction: If you're at or over your limit, you may not be able to complete a purchase with your credit card.
  • Increased interest rate: If you go over your credit limit, the card issuer could begin charging you a much higher annual percentage rate (APR), called a penalty APR or default APR. This higher interest rate will make repaying the debt more difficult because more of your payment will go toward interest.
  • Reduced credit accessibility: Because going over the limit is a sign that you may be in financial trouble, the issuer may pull back by lowering your credit limit or even canceling your account.

If your credit card offers over-limit protection and you opt in, you can go over your credit limit with fewer associated troubles. For example, the transactions will go through (up to a set amount, which is determined by the issuer), but likely you'll be charged a fee when you take advantage of it. Being able to go over the limit may be convenient, but it can also get expensive—and it will still hurt your credit.

What to Do if You Go Over Your Credit Limit

To avoid the consequences associated with going over your credit limit, take action:

  • Make a payment immediately. Try to pay enough so your credit utilization ratio is in a healthy place. Start by sending enough to get it under the limit, then drive the balance down so you have at least 70% available credit.
  • Concentrate on the problem card. If you have multiple credit cards, but this is the only one where you've exceeded your limit, strategize. Make the minimum payments to the others and the most to the card that's hurting your credit utilization ratio the most.
  • Request a credit limit increase. If your credit score is decent, you've been managing other accounts well, your income can handle an expanded credit line and you have a positive relationship with the credit card issuer, you can request a higher credit limit. That will instantly improve your credit utilization ratio because you'll have more available credit.

In the future, avoid getting too close to your credit limit. Many credit card issuers allow cardholders to sign up for email and text alerts when your balance is reaching the danger point. But also keep a close eye on your balances on your own. Make a habit of tracking your spending in real time, and monitoring your statements online weekly if not daily. Stop charging when your debt starts to get too high.

Additionally, monitor your credit so you can see how your credit utilization is affecting your scores. You can get your free FICO® Score from Experian to see where you stand. As you employ methods to bring down your balances and ensure that your credit utilization ratio is in a good place, track your credit scores to see how they've changed. You might be surprised at the improvement you'll see once credit card balances are paid down.

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