Beginning in 2011, I worked for a solid year to pay down the lingering debt leftover from my first few years struggling in New York and shore up my credit score.
By last fall, I was ready to take on a new, higher line of credit, and I had one goal in mind: Using it as a tool to build my credit history and keep improving my credit score.
It's been five months and I have finally realized what a huge mistake I made.
First, what you have to understand is that a large part of your credit score is based on how much debt you are carrying vs. how much available credit you have.
It's ideal to pay it off each month and have a picture-perfect zero balance, but generally, experts say somewhere between 10 to 30 percent utilization is fine.
When I was approved for a new Bank of America cashback card in October, my limit was quadruple that of the other credit card I carried. It would be easy to stay within 10 percent of my available credit if I only used it for groceries and paid it off each month .
With the combination of a low utilization score and on-time payments, my credit score would improve, and I would earn cash back in the process.
That was the plan anyway.
When I got my free annual credit report last week, I realized for the first time that my new credit card was not reporting a credit limit at all. It just said 'N/A' on my credit report.
I wanted to figure out why, so I called up Bank of America. I spent at least three hours playing phone tag and speaking with six different representatives before I found an answer.
I was the proud owner of a 'No Preset Spending Limit' Visa Signature card.
'No preset spending limit' is a special breed of credit card perks that has grown in popularity as lenders have looked for new ways to lure in customers. It's generally reserved for customers with solid credit.
With that kind of card, the credit limit my bank had given me was more of a suggestion than a rule. If I were to go over that balance, they wouldn't penalize me and, since they don't report that limit to credit bureaus, I supposedly wouldn't take a hit on my credit score.
It's not exactly a blank check. A BofA rep I spoke with wouldn't give me a firm number, but he said they have the right to review and decline any purchase that goes over my "limit."
Chase, Bank of America and Barclays are just a few of lenders that all offer the Visa Signature brand.
Here's why I'm worried.
The bank made it sound like I should be glad they wouldn't report overspending to credit bureaus. But that presents a whole other problem.
Credit bureaus have to come up with a credit utilization number in order to calculate your score, you see, so when they see that a card has no limit, they, for some bizarre reason, just use your highest balance (that is, the largest amount of cash you've charged to the card at one time) as a limit instead.