Visa Signature Cards: 'No Pre-Set' Credit Limit May Hurt Your FICO

Visa Signature Cards: No Pre-Set Credit Limit May Hurt Your FICOVisa boasts that a “no pre-set spending limit” on its Signature cards gives consumers the flexibility to exceed their credit limit “should you ever need the additional purchasing power.”
But that bit of peace of mind comes at a price in the form of a potentially lower credit score.
The reason: a big part of your FICO score is based on the amount of debt you carry versus how much credit is made available to you. With credit cards, that is usually stated clearly in the form of a credit limit.
So what happens to your score in the case of a Visa Signature type card?
Credit scoring formulas will likely use the highest balance reached on that particular card as the limit.
That could have a negative effect on your score if your were a responsible consumer by paying off all or most of your balance every month.
Mandi Woodruff writes an interesting personal account of such a problem for Business Insider. She was surprised by the credit-limit conflict after getting a Visa Signature card through Bank of America.
“When I was approved for a new Bank of America cashback card in October, my limit was quadruple that of the other credit card I carried. It would be easy to stay within 10 percent of my available credit if I only used it for groceries and paid it off each month,” Woodruff writes.
But when she got her free annual credit report, she realized for the first time that her new credit card was not reporting a credit limit.
“It just said ‘N/A’ on my credit report. I wanted to figure out why, so I called up Bank of America. I spent at least three hours playing phone tag and speaking with six different representatives before I found an answer,” she said.
In the end, Bank of America allowed her to change cards from a Visa Signature to a Platinum Plus, with limits that are firm and are reported to credit bureaus.
For most people concerned about their credit score, they is likely the best option.
Chase, Bank of America and Barclays are just a few of lenders that all offer the Visa Signature brand.
Another option: spend as much as you can quickly, say $10,000, to establish that high balance, and then quickly pay it off. Of course, that strategy relies on you have tons of cash at hand and an already established plan to buy big-ticket items.
Which brings us back to a common sense approach, carefully review any new credit card offer, including the interest rate beyond the introductory period and the credit limit policy. And be cautious of the “no pre-set spending limit’ marketing pitches.

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