Accounts with no limits on credit card debt can pose problems

There are several types of accounts available from a number of lenders that will allow consumers to rack up as much credit card debt as they want without imposing a limit on the expenditures, according to a report from the New York Times. For example, Visa Signature and World MasterCard accounts don't report a preset maximum to the credit bureaus.

This type of no-limit account can present several problems for consumers, such as the ability to compile large amounts of credit card debt on one card, the report said. Doing so may be acceptable if accountholders can pay off their balance every month, but if they can't, then they can run into hefty interest charges if the total amount owed grows too high.

In addition, cards like this can create a drag on consumers' credit ratings. A large proportion of credit score is made up of a utilization ratio, a calculation of how much credit they have to the percent which is actually being used.

Because these accounts don't have a limit, there's nothing to report to the bureaus, the report said. For example, if a consumer is currently borrowing $5,000 of a maximum $10,000, opening one of these accounts can lead to higher debt despite not increasing the available credit. However, these accounts can be reported as open and therefore have no effect on utilization.

In addition, the report said Fair Isaac, the company that developed the FICO credit scoring system, said a consumer's score will ultimately depend on how a particular person uses their no limit cards compared to their other accounts. If they tend to put less of their credit card debt on the unlimited account, their credit rating could actually improve. However, the opposite is also true, meaning that overusing that card could still bring down a score.

Many consumers have had their credit score damaged in the past due to missing a single monthly bill. This is because payment history makes up 35 percent of a person's total score, so even one late payment can cause a big problem – even if it missed the deadline by just a few days.