Share

Impact of high credit limit on credit score

A Fin24 user wants to know whether the high credit limit on his credit card could impact his credit score. He writes:

Does having a high credit limit on a credit card - for instance R100 000 - reduce my credit score?

I have a home loan and vehicle loan as well as a credit card, which is my only debt.

READ: Impact of credit report on vehicle finance

Lerien van der Merwe, manager of Debt Rescue's legal department, responds:

When your credit score is calculated it is done by evaluating different categories of information held by the different credit bureaus.

The categories include payment history, size of amounts owed, length of credit history and amount of recent credit applications.

These are not the only information taken into consideration as some other variables also play a role in determining your credit score, for instance, administration orders, sequestration orders, judgments, adverse information and collections information.

Payment history is one of the most important factors taken into consideration when calculating your credit score. Late payments and failure to pay will have a big negative impact on your score, while paying accounts in a timely manner will have a positive impact.

Always maxing out the credit limit on your accounts can also negatively impact your credit score. Interestingly enough, when you open an account, but don’t make use of it, it will also negatively impact your score.

READ: How to read your credit report

The length of time that you have had credit is another very important variable in calculating your credit score. The longer your credit history is the better.  

Lastly, the number of recent credit applications made also plays a role as this can be an indication that you are experiencing financial difficulties.

In essence, the amount of your credit card limit can influence your credit score, especially if you max it out every month, or on a regular basis.

You should remember that a credit score takes many variables into consideration when determining the score and the conduct on your other accounts will also influence the ultimate score.

ALSO READ: Empower yourself with free credit report

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent-ruolie
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders