Need Help: Credit Line Reallocation, Balance Transfer, and Credit Score
After posting an entry last week on consolidating several Chase credit cards and reallocating the credit lines to a new Chase Freedom card* in order to take advantage of the 0% balance transfer offer, I got the following comments from John regarding the practice:
When you consolidate the credit limits from various cards do you often run into situations where the high balance (highest amount ever owned on the card) is greater than the lowered credit limit. Would that not appear as if you have exceeded your credit limit?
I usually close the account and move the entire credit line to other cards if I no longer need the card. Only recently (first in May with two cards from BoA) I left the cards open after shifting all but a couple of hundred dollars of credit line because I want to preserve the credit history of the old cards. Thus, it never occurred to me that the now lowered credit limit could have a negative impact on my credit score. After a couple of emails, John further explained how the “exceeded your credit limit” happened:
My friend who plays the 0% CC game did mention that it affected his score and report negatively; but the effect was temporary. However in one case he was unable to reallocate the credit limit back to the original card after he paid the debt and this has caused a permanent “negative” record on his credit report. So while he still plays the game, he no longer moves the credit limits. That is why I was curious in checking if any others have experienced similar negative effects.
What I am thinking is even though the credit line after the reallocation is only, for instance $500, it shouldn’t be used to compare against past charges and conclude that those charges have exceeded the limit. At the time when the charges occurred, they were well within the allowed range. I am not convinced that a negative record will be entered in my credit history simply because I now lowered my credit limit. If that’s indeed the case, I will certainly dispute the record since I have never gone over the limit!
In addition, when I checked three credit reports I got from the credit reporting agencies in the past 12 months, I found at least Experian showed the history of credit limit changes:
Thus, it seems to be impossible to drawany connection between current credit limit and past balances. I don’t feel I’m in a unique situation as reallocating credit lines among cards is quite common. So far I haven’t heard any voice against such activities.
This is totally new to me and I have no idea whether it’s true or not, though I don’t believe that’s what’s going to happen. Do you have any experience about this matter? If so, please share with us and your help is appreciated.
This article was originally written or modified on . If you enjoyed reading this post, please consider subscribing to my full RSS feed. Or you can also choose to have free daily updates delivered right to your inbox.