I was thinking of getting a VISA with a $500 or $1K limit at my credit union and putting my live-in girlfriend on as an AU so that she can put household and grocery purchases on it. Right now I hand her cash to do the purchasing with, and it is somewhat unwieldly. She has been highly responsible so far, and has a mature, respectful attitude towards finances. Will I hurt my chances for future credit if I get a card with a low limit like that? Currently I have one VISA card with this credit union, and it has a $5000 limit, 80% utilization. I just began a used car loan for $6200 with a 48-month term. I have one paid collection on my report and a college student CC I got behind on back in '99. I am attempting to remove the above two items altogether.
I wouldn't think so, it will only add to your credit to debt ratio, so in fact it will help you in your utilization ratio.
Yep. I agree. Fico doesn't take limits only into consideration. All it cares about is how much of your revolving credit you are using. BTW, if you paid that 80% down to about 50%, you'd probably see a healthy increase.
When they figure those ratios how do they do it? I can think of two ways. A) Add % utilization of lines of revolving credit together. Divide by # of lines of revolving credit. B) Add up total credit used on all lines of revolving credit. Divide this by the total credit limits on all lines of revolving credit. Method A would mean that having several small lines of credit that aren't maxed out would partially offset having one large maxed out line. Under method B having small lines of credit that aren't maxed out and one big maxed out line you'd still be basically screwed. Does anyone know?
I don't think it's all that complicated as you may think, I'm pretty sure they don't single out a paticular CL, you might be confusing the the fact that they consider the amount of revolving credit lines open in your score group or amount of credit given to you in your group. Lol, hope that some what makes sense.
I'm going togo out on a limb to try to explain this funny scoring system heh. You ask does a low limit hurt your score yes and no. Example: lets say I have 2 retail cards with total limits being around $500 but the avg person within my score group has $1500, that in it's self can neg affect my score, but thats only in the RETAIL category. I believe there are several categories RETAIL,INSTALLMENT,REVOLVING ETC.. But like LKH says in your case the key to your situation is your utilization which is one major factor contrbuting to your low scoring OVERALL regardless of one paticular category or credit card. Pay down that debt and get your utilization down to around %50 you'll see a nice little bump in score, %89 is considered high and risky. There's more to this scoring system, I'm just trying to explain the jist of it.
