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Post-Bankruptcy Survival: Use Credit Cards With No Spending Limit Sparingly

Posted By admin || 17-Jan-2011

Depending on your credit card usage habits, having a credit card with no spending limit could have a negative impact on your FICO score. Credit cards that have no spending limit report their cards to the credit reporting agencies in one of two ways, or  a) as an open account or b) as a revolving account.  If the credit card is reported as an open account it will have no impact on the debtor's credit rating. However, if the credit card account is reported as a revolving account it could have either a negative or a positive impact on the debtor's credit report depending on how the debtor uses the credit card. Debtors who keep a high balance on the revolving credit card account which has no spending limit could be dinged for having a "high utilization" of the credit on the card. Any credit card which shows that the debtor uses 50 percent or more of the credit limit will have a negative impact on the debtor's credit score because of the "high utilization" factor. If debtors want to avoid lowering their credit score they may want to limit their usage of these types of credit cards.

For post-bankruptcy debtors, credit cards which have the tendency to negatively impact their credit score should be avoided.  For those exiting bankruptcy, every FICO point lost or gained can have a huge impact on their ability to get a mortgage, car loan or other types of credit especially since they are in the rebuilding phase of their credit history.

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Categories: Credit and Bankruptcy
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