January 15,2007
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No Limits?
It might seem like the ultimate status symbol to have attained a no-limit credit card. In our star-gazing culture, we've been exposed to the limitless American Express that Jessica Simpson and other such celebrities carry. If you are living a "normal" life, however, you may find that no-limit credit cards have some very real downsides in terms of your credit score.
Because your credit score is, in part, calculated on how much of your potential debt you are carrying, a no-limits card can throw a real wrench in the works. If you have no credit union, the bureaus can't calculate your potential debt ratio using the same formula. Some will take your highest balance as use that as the future, stand-in "credit limit," meaning that, in the future, your score could be hurt if you carry more than 50% of that balance. The golden rule of credit card balances is that they should not exceed 25% - 50% of your credit limit. As 30% of your credit score is based on this ratio, it's always a good thing to keep your eyes on!