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Subject:  Re: Some house cleaning questions Date:  1/2/2013  6:12 PM
Author:  aj485 Number:  306615 of 312956

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.

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