Credit Repair/I Screwed Up!!!
A few days ago I made an online purchase which I thought I paid for with my debit card but ended up using my credit card. Instead of verifying the number I relied on my faulty memory and the order went through so I thought nothing of it. I realized the next day though that the credit card number I entered did not exist but was a mix of 2 of my credit cards. I immediately contacted the vendor to make them aware of the issue and ask that they cancel the order because I thought I may have used someone else's credit card by mistake and didn't want that person to think they were a victim of ID theft. I also called my credit card company. Both my credit card company and vendor said there's nothing they could do as the order had already been processed and couldn't be canceled. I was told to just return the packages and that person's credit card would be credited. I check my credit card and bank account everyday every few days to make sure there are no unrecognizable transactions, when I noticed the orders I placed had posted to my credit card 3 days prior. Those orders put me over my credit limit by $450. I was angry that the card wasn't declined since I entered the wrong card number and expiration date, and was also angry at myself for making such a mistake. I think the vendor was able to bill the valid card because I had used it on prior purchases and it was listed as a method of payment on my account.
My credit is excellent (high 700s, low 800s) -- it took years to get here after messing up my credit in college and the few years after. I asked the credit card company why the transactions were not declined and they said because of my good payment history and good credit. I immediately made a large payment which of course put me below my credit limit.
(I hope that since it was only over the limit 4 days the damage will be minimal). How bad a hit will my credit scores take and how long will the repercussions last?
Sorry I was long-winded.
-Mad at Myself
There is some debate in the credit community regarding the credit score impact of going over your credit limit. Some say that it is actually a good thing and shows lenders that your accounts are in such good standing that your creditors will actually lend you more than the credit limit. While others say that it makes the consumer look financially irresponsible and going over the credit limit will hurt your scores.
Depending on which credit scoring model you use, your credit score may increase, decrease, or stay the same. The problem is that there are literally thousands of completely useless scoring models out there which companies sell to consumers looking for any kind of score.
Even FICO scores, have 49 different varieties, so it's difficult to gauge what going over your limit will do to a credit score unless you know which credit scoring model is being used.
Now that I have that out of the way, here's what I have seen in my experience.
Every account trade-line has a data point called "High Credit", this is the highest balance that the account has ever had. If the High Credit data point is higher than the Credit Limit data point, the score will decrease because it shows that at some point in time you have gone over your credit limit.
Hopefully your payment reaches the credit card company before they report to the credit bureaus and there wont be any changes to your credit score at all.
But, lets say that the credit card company reports that you went over your limit. This will decrease your credit score, so lets take a look at what it will take to repair this account.
1. Pay down your credit card to a $0 balance.
2. Make sure that all of your other credit cards are at a utilization rate of 30% or less.
(Utilization rate is the balance to limit ratio.)
3. Wait for the updated information to report to your credit report.
4. Call your credit card company and ask them to increase your credit limit by $500.
(This way your Credit Limit will be higher than your High Balance.
5. Once your new credit limit reports, your credit score will be back to where it should be.