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There are a lot of different factors that influence your credit score, the biggest ones being paying your bills on time, and the amount of credit that you’re utilizing. For example, if you’ve got $20,000 of available credit between all your accounts, and you’re running a combined balance of $17,000, that represents a high credit utilization, and tells credit card companies that you’re spending outside of your means. If you apply for new credit, chances are that you’re going to continue spending similarly, so a lot of companies will decline applicants who have high utilization.

TPG reader Mikhail tweeted me:

“@thepointsguy I have a high credit limit that I don’t need. Can I lower it without impacting my credit score? I pay the balance in full.”

First, Mikhail, good job for paying your balance in full! You should also try to pay it as early as possible, because even if you pay in full, credit card companies report at different times, and can even report your balance before they receive your payment. That’s one aspect of credit that I hate; it’s not right that even if you pay your bill on time, you can still have that balance reported as utilization.

At any rate, given that a low utilization is better, there’s really no benefit to reducing your credit limit, even if you don’t plan on using it. Your score will not go up if you have less credit. If the credit card company reports your credit mid-month (before you’ve paid), and you have less overall credit available, your utilization will appear higher and your score could drop. So, preemptively slicing your available credit will probably just hurt your score.

FICO

I’d say keep your credit in case you ever need it. You might get a new job and have the ability to pay for a large company expense out of pocket; you’ll be reimbursed and you can keep those points. I think having the available credit just in case of a situation like that is useful, and to make sure whatever credit you do use results in a lower utilization.

If for some reason you apply for a new card and are declined or are put in pending because you have too much available credit, you can always call up and request to move credit around. Most banks will allow you to take existing credit and apply it towards the opening of a new account.

Again, my advice is that you don’t reduce your credit limit, as doing so will probably hurt your score.

Check out these related posts for more info:

How Card Applications Affect Your Score
When to Cancel a Card
How to Get a Free FICO Credit Score from Certain Credit Cards
How Many Credit Cards Do You Have Open at Once?

If you have any additional questions, please message me on Facebook, tweet me @ThePointsGuy, or send me an email at info@thepointsguy.com.

American Express® Gold Card

With some great bonus categories, the American Express Gold Card has a lot going for it. The card offers 4x points at US restaurants, at US supermarkets (up to $25,000; then 1x), and 3x points on flights booked directly with airlines or through amextravel.com. It is currently offering a welcome bonus of 35,000 bonus points after you spend $2,000 in the first three months.

Apply Now
More Things to Know
  • Earn 35,000 Membership Rewards® Points after you spend $2,000 on eligible purchases with your new Card within the first 3 months.
  • Earn 4X Membership Rewards® points at U.S. restaurants. Earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Earn up to $10 in statement credits monthly when you pay with The Gold Card at Grubhub, Seamless, The Cheesecake Factory, Shake Shack, and Ruth's Chris Steak House. This is an annual savings of up to $120. Enrollment required.
  • $100 Airline Fee Credit: up to $100 in statement credits per calendar year for incidental fees at one selected qualifying airline.
  • Choose to carry a balance with interest on eligible charges of $100 or more.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms apply.
  • See Rates & Fees
Intro APR on Purchases
N/A
Regular APR
See Rates & Fees
Annual Fee
$250
Balance Transfer Fee
See Terms
Recommended Credit
Excellent/Good
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.