In my book, 7 Steps to a 720 Credit Score, we talk about the myths of the credit-scoring world. Here’s another one I just read about in YOU Magazine. In short, the myth says that if a credit card company authorizes an over-the-limit purchase, your score won’t suffer. After all, the credit card company authorized the purchase. YOU Magazine goes on to explain that this myth couldn’t be further from the truth.
The article is right on!
In my book, I counsel people to keep their balances no more than 30 percent of their limit. On a $5,000 credit card, this means your keep your balance no higher than $1,500. On a $10,000 limit, your balance should never be higher than $3,000. The credit-scoring bureaus want to see that you can handle credit responsibly, and anything higher than 30 percent suggests otherwise. If you actually go over the limit, even if the credit card company approved it, you have a double whammy: Not only do the credit bureaus worry that you cannot handle credit wisely, they also worry that you are getting yourself into a deep financial bind that is causing you to trespass into forbidden territory. Also remember that the credit card companies and the credit-scoring bureaus are two different things. They aren’t communicating with each other, and the credit-scoring bureau doesn’t know or care whether the creditor allowed the charge—they simply look at your balance, compare it to your limit, and start deducting points.
*You Magazine is an online magazine by Cindy Ertman and Linda Buchanan. The full article can be read at http://www.allaboutnews.com/vc.php?a=y&b=29&i=183&u=ceplatinum@aol.com
