High credit limit - any drawbacks?

I’ve been searching online but can’t find any concrete information other than one American article, so…

What, if any, effect would simply having a high credit limit have on one’s credit score and/or lender decisions?

I can find lots about how asking for an increase would affect the credit score, due to a hard search etc, but not much about whether having and keeping a high limit might have a negative or positive effect, or none at all.

For context, we can assume that the same low % utilisation would be kept before and (lower, by default) after the increase, and the salary would also remain the same.

EDIT: by “high” limit I mean something like 60% or 70% of the person’s annual salary.

2 Likes

As far as I’m aware a high limit in itself isn’t an issue. I have a credit limit significantly higher than my above average salary and my credit scores are as high as they can be and have had no issue opening new accounts, so if yours would be less than your salary I wouldn’t see that being an issue. Some articles say it can be treated as a risk as you could over spend, but these are more often framed as it could be a risk to you (i.e. thinking “oh I can spend loads”) as opposed to it being seen as a risk to lenders. Ultimately they want to see you can handle borrowing responsibly, so keeping the usage low has a higher impact. My Transunion credit score shot up when I brought a card down to < 50% usage.

2 Likes

Well, it might affect what other products lenders will give you, if they see you already have a limit of, I don’t know, £10,000 on a salary of £40,000 they might think it’s not good to lend you more short term credit. They also might see that it doesn’t look like you are using your credit so you don’t seem like a good person to make money off.

Then again, you’d already have more money available thank you had before, and more than you need, so in that way the decisions of other lenders for short term credit are something you have to worry less about.

For mortgages and larger loans, credit card use doesn’t really affect those as far as I understand, that’s all about affordability and the credit check is more to check for big black marks.

2 Likes

Have too high credit limits can look a risk to lenders, same goes for available credit.

Strange, but true.

As such, they may think twice as oh, this person might spend all their current limits, and ours, and no longer afford to meet any of them, so it’s a no from us.

Other lenders might be quite the opposite.

All depends on risk appetite.

3 Likes

Not affected mins in the slightest, I’ve got a lot of available credit, which I rarely use. I should really just close down what I don’t use but I’m too lazy to sort it. :sweat_smile:

1 Like