Why Getting Too Close to Your Credit Limit Can Hurt Your Score
Did you know your credit score can go up and down each month, even if you're usually a responsible credit user?
Your credit score isn't some static number - it's actually a monthly assessment based on the information your lender provides to credit bureaus, say Atlanta bankruptcy attorneys. It's a snapshot of your credit behavior at one point in time. So if you ring up an unusually high credit card balance one month, all of a sudden you look like a riskier borrower - even if your past history says otherwise.
That's good and bad news. Good, because it means you have more power to change your credit score than you may realize. Bad, because your behavior one month can jeopardize your finances the next.
You already know you shouldn't exceed your credit limit. Besides being bad for your score, it can stick you with a hefty fee. But actually, just getting close to your limit can hurt your credit. Doing so increases your utilization, i.e. the amount of credit you're using. And because risky credit customers tend to charge a lot on their credit cards every credit cycle, you can look like a risk by doing the same - even if it's a rare exception.
It's OK to put the occasional large purchase on your credit card - it's one of the reasons many of us use plastic in the first place. But you might want to think twice before doing it prior to applying for a loan or new card, as your big balance could knock enough points off your score to cost you that low interest rate - or the ability to borrow, period.
It's when credit becomes a habit that you have to watch out. If every month means you're getting closer to your limit - or worse, exceeding it - it's a sure sign that you're spending beyond your means. And that's usually a result of having too much debt. If your debt has become, well, a burden, bankruptcy can help you break free by offering an affordable repayment plan and protection for your assets. Want to know more? It's as simple as signing up for a completely free personal debt analysis with one of our Atlanta bankruptcy attorneys.