UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308670  
Subject: Re: Some house cleaning questions Date: 1/2/2013 6:12 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
so because the card reports "no limit" -- any spending on that is viewed with a zero in that calculation? you'd think they would assign a ratio number of infinity or at least $100K or something much higher than a fixed limit card.

They do use a proxy for the limit. Unfortunately, it's usually a lot lower than a card with a fixed spending limit. As I said, for cards that don't report a limit, credit scoring algorithms often look at the maximum spend in the last 1 - 2 years, and use that as a proxy for the credit limit. So, if the most you spent in any one month during the last few years on your daily spend card was $4,000, and you typically spend $2,000 in a month, your typical ratio will show as 50% and in the month you spend your maximum, the ratio will show as 100%. On a single card, these ratios can be high enough to trigger a lower credit score.

This is because many 'no limit' cards are charge cards, that don't allow you to carry balances, and are supposed to be paid in full every month. Because of these rules, calculating a credit ratio is really kind of a moot point, which is why the credit scoring algorithms just use what your maximum monthly spend has been as your 'limit'.

And speaking of 'no limit' - it's not really 'no' limit - there are limits, as you would probably find out if you tried to charge something for more than, say, $50k or $100k - the credit card companies just don't tell you what level they will flag purchases at. So if you are planning on purchasing something really large on a card that is 'no limit', you are best to check with the card company first, in order to ensure that you will be approved.

Happy New Year to you, too.

AJ
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (17) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement