How No Spend Limit Credit Card Affects Your Grade
If you have a high credit rating, you may qualify for a No Preset Spending Limit (NPSL) card. However, credit limits do matter when it comes to calculating your credit rating . So how does the NPSL card affect your score? It’s tricky, but Credit.com explains the basics.
An NPSL card is just like any other card , except that you can accumulate a large amount on it, and usually you need to pay off your balance every month. Credit use makes up a large portion of your FICO rating and is basically the amount of credit available to you versus how much you actually use. For best results, you need low credit utilization. But since NPSL cards have no restrictions, how does this affect the use of credit?
According to Credit.com, there is no definitive answer and it can vary from card to card. They explain that the NPSL card usually appears on your report as a “flexible credit card”. And they do report the credit limit, usually overstated-to-bureau. As Bankrate explains , if you read the fine print these cards usually have a limit, they just don’t charge you anything for going over it.
Credit.com offers some useful rules of thumb:
- Don’t worry about credit ratings if your NPSL and all other card usage is low.
- If the account type is a payment card type rather than a renewable one, the NPSL account will be completely excluded from the calculation of using the most recent versions of FICO scoring models.
- Whether it is a credit card or a payment card, if there is no credit limit and a high credit amount, the NPSL card will be excluded from all usage calculations.
They add that if you have a high credit rating and little debt, an NPSL card can be helpful. Otherwise, you probably want to skip it . You can find out more at the link below.
Are Credit Cards Bad For Your Credit? | Credit.com