No Limit Credit Cards Hurt Score

Do you have a no-limit credit card? If you do, it actually might be hurting your credit score because of the way your credit card company is reporting your credit limit on that card. That’s important because one component of your score is “credit utilization,” or, how much of your total limit you’re currently using. On no-limit credit cards, the company might be reporting the largest balance you’ve ever carried on that card and so your credit utilization could be incorrectly inflated. What’s even worse is that some companies don’t even report any limit for that card, which is bad (you have a credit card with a credit limit of $0??? wouldn’t you start asking questions?).

There are two solutions that Bankrate suggests. If the company does report the high balance, rack up a lot of charges, pay them off with the next bill, and now you have a large reported limit and that should improve your score by lowering your utilization. If they don’t report anything, close the card because otherwise you’re hurting your score.