If you've recently gone over the limit on one of your credit cards, odds are you're a little embarrassed, a little disappointed and a little unsure of how this will affect the rest of your life. Exceeding your card's limit can affect many areas of your life outside of that one particular credit card. Depending on your situation, one of those areas may be your auto financing.
Exceeding Credit Limits
If you find yourself exceeding your credit limit, it might be a sign of a bigger problem. Unless a big purchase sent you over your credit limit, it's likely that your balance was quite high before you exceeded your card's limit. The credit card company will likely charge you a fee and may increase your interest rate as a result of your purchases in excess of your credit limit.
Impact on Credit
The instance of you going over your credit limit in and of itself won't affect your credit. However, the fact that your balance exceeded your available credit is a bad sign. Both your balance and your available credit are indicated on your credit report, and your percentage of available credit used will be affected as a result. These factors may persuade creditors to believe that you're a high risk for credit and can therefore decrease your credit worthiness.
Existing Auto Financing
Going over your credit limit may affect your auto financing, depending on what kind of auto loan you have. If your auto loan is a fixed rate loan, the instance will have no bearing on the future of the actual loan, as your interest rate cannot be changed over the life of your loan. However, you may find it more difficult to make your monthly payment if your card has been hit with an over-the-limit fee and an interest rate increase. If you have a variable rate auto loan, you may see an increase in your interest rate if your credit score has decreased, something that depends largely on whether your exceeding the limit was a one-time mistake or a consequence of over-reliance on credit.
Future Auto Financing
If you're looking to purchase a new vehicle, exceeding your credit limit can have a more profound impact. While your ratio of credit used to available credit is just one part of your credit score, it's a pretty hefty portion that comprises 30 percent of your overall score. A creditor may determine that your balance is too close to your credit limit, even if you've managed to get the balance under the limit, and either decline to extend you credit or charge you a high interest rate.
CARD Reform
Fortunately, exceeding your credit card's limit used to be a much easier thing to do than it is today. Before the Credit Card Act went into effect in 2009, you could spend as much as you wanted to and just get hit with an over-the-limit fee. Today, you have to opt-in to be able to exceed your credit limit. If you choose not to opt-in, you won't be able to go over your limit; any charge that would have sent your card past its limit will simply be declined. This can help you to protect the interest rate on a variable rate auto loan or any auto financing you may seek in the future.
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