Credit Utilization Basics

• The main difference between a no-limit credit card and a regular credit card with a spending limit is the way that it is factored into your credit utilization. Your credit utilization is the percent of your available credit that you are using at any given time, both on each individual card and overall. Find your utilization by dividing the credit card balance by the credit card limit. In general, the higher your credit utilization, the lower your score.
  
  

No-Limit Credit Utilization

• No-limit credit cards will negatively affect your score if the issuer reports your current balance or your highest recent balance in place of your credit limit. For example, if the most you have ever charged on the card at once is $3,000, the issuer might report that as your credit limit. Therefore, if you charge $1,500 on the card one month, it will look like you are using 50 percent of your credit, even if the issuer would allow your balance to go up to $15,000. However, other issuers report no limit on the card or list the card as an open account, not a revolving one. In either of these situations, the credit score formula will completely ignore the card when calculating your credit utilization, so it will not have a positive or negative effect.
  
  

Checking the Effects

• The only way to know how your card is affecting your credit score is to pull a copy of your credit report. You can get one from each of the three major reporting agencies for free each year through AnnualCreditReport.com. When you get the report, look at whether the account is listed as open or revolving. If it is open, your balance and limit do not affect your score. If it is revolving, look at the credit limit that your issuer reports. If your usual balance is below 30 percent of the limit, this should not hurt your score. However, if it is higher, the card is probably lowering your score.
  
  

Usual Credit Card Effects

• In addition to the unusual circumstances surrounding a no-limit credit card, your use of the card affects your credit score in most of the ways that an ordinary credit card would. Your payment history on the no-limit card appears on your credit report, and missed payments hurt your score while consistent on-time payments help your score. Applying for a no-limit credit card will slightly hurt your score, just as applying for a regular card would. Lastly, having a no-limit credit card account go to a collections agency because you don't pay it will seriously hurt your credit score.