Credit Card limits

Discussion in 'Community Discussion' started by bruinsrme, Feb 15, 2009.

  1. bruinsrme macrumors 601

    bruinsrme

    Joined:
    Oct 26, 2008
    #1
    Today I happened to look at one of my credit cards and noticed the limit was $57,000, not the balance just the limit.

    I did a little research and if I ask for a reduction that can be considered a negative hit on my credit score. If I cancel it same thing.

    I really don't have a use for a crazy limit like that.

    Any suggestions that won't ding my credit score?

    Thanks
    Scott
     
  2. dukebound85 macrumors P6

    dukebound85

    Joined:
    Jul 17, 2005
    Location:
    5045 feet above sea level
  3. Spizzo macrumors 6502

    Joined:
    Feb 1, 2004
    Location:
    Pacific NW
    #3
    Unless you are worried that you might rack up that much debt, leave it. What 'dings' your score is the reduction of available credit. If you lower your limit or cancel the card, you have less available credit, so your debt to credit ratio goes up, giving you a lower score.
     
  4. mikeyredk macrumors 65816

    Joined:
    Mar 13, 2003
    #4
    Shred the card and keep renewing it when you get the new card shred that card
     
  5. bruinsrme thread starter macrumors 601

    bruinsrme

    Joined:
    Oct 26, 2008
    #5
    We want to by a second property on a lake somewhere. My accounts together have over $120k in available CC credit. I haven't really looked at the limits in quite a while. I am worried this may be a problem when we start running the numbers.

    When I get a new card I activate it, fill my gas tank and then it goes into a drawer. Today I logged into my accounts but this time looked at the rates and limits which sparked the concern regarding the limits.

    I carry three cards and use them in this order
    debit
    Amex
    Mastercard
    While the others sit in a drawer wondering when they if will ever have their magnetic strip rubbed again.
     
  6. redwarrior macrumors 603

    redwarrior

    Joined:
    Apr 7, 2008
    Location:
    in the Dawg house
    #6
    One problem that can occur is that if you apply for a mortgage or some other large loan, you can be declined because of your available credit being too high.

    Funny though, I didn't know that asking for an available credit reduction could negatively impact your credit score. We recently did that on 3 cards and our credit rating went up. So I'm confused about who told you that reducing credit card available credit would hurt your score.
     
  7. mikeyredk macrumors 65816

    Joined:
    Mar 13, 2003
    #7
    One of the basis of the fico score is the percentage of debt you have if you have a revolving debt of 1k with available credit of 10k you are using 10% of your credit. If you cancel a card and your available credit drops to 8k then you are using 12.5%. Don't forget that this is just one of the items that go into the score. Paying your bills on time; length of credit, etc…
     
  8. bruinsrme thread starter macrumors 601

    bruinsrme

    Joined:
    Oct 26, 2008
    #8
    One issue is I have debt due to a lawsuit. Geez lawyers charge for anything and everything.

    So one card has a sizable amount which I think is playing into the ratio.

    Working on knocking it down but it will take about 18months.
     
  9. mikeyredk macrumors 65816

    Joined:
    Mar 13, 2003
    #9
    bruinsrme get a free credit report to make sure there isn't anything funky out there on your name. You are entitled to one a year from each of the three bureaus. I personally make it a habit of getting one every year since I got my first credit card. And I have kept every single one.

    Your paying a lawyer with a credit card!?!?! at those ridiculous rates?
     
  10. rdowns macrumors Penryn

    rdowns

    Joined:
    Jul 11, 2003
    #10
  11. bruinsrme thread starter macrumors 601

    bruinsrme

    Joined:
    Oct 26, 2008
    #11
    Cash advance then a balance transfer for the lower interest rate.
    It was a very ugly suit. It was cheaper to concede than to fight it.

    my credit score is fine.

    I got the free one last June and just paid for one last week.
     
  12. Abstract macrumors Penryn

    Abstract

    Joined:
    Dec 27, 2002
    Location:
    Location Location Location
    #12
    I thought the same thing as red.

    "Available credit" is the same thing as a loan. The banks assume that the higher your credit card limit, the bigger the risk you are for paying back a bank loan or mortgage, since you could potentially use up your entire $57000 credit card limit in 1 minute. In other words, you could potentially go from being completely CC debt free, to completely max'ed out in an instant. When your credit rating is being considered, either a huge limit on a single credit card, or a large number of credit cards with smaller limits, actually hurts your credit rating.

    Cancelling some credit cards, or lowering your limit should actually improve your credit, since you have less potential to accumulate debt through your CCs, which decreases risk for the bank.

    Of course, a history of paying back your loans and credit card debt is also factored into it.

    Yes, I'd like to know too, please.

    I'm not an expert, so if I can learn something, then great.
     
  13. heehee macrumors 68020

    heehee

    Joined:
    Jul 31, 2006
    Location:
    Same country as Santa Claus
    #13
    I'm always confused about credit card limits affecting credit score. I think I have 5 credit cards, one of them doesn't have a "limit" on it. But I only use 2 and I always pay it in full. My gf and I are house hunting right now and I got a pre-approved mortgage for alot more than I thought I could get and that's on my salary alone. No wonder the economy is the way it is right now. :eek:
     
  14. bruinsrme thread starter macrumors 601

    bruinsrme

    Joined:
    Oct 26, 2008
    #14
    My score dropped when I opted out of Sears (now Citi) due to an increase in the APR from 12 to 18.9% Sears had a $2500 balance.. At the same time I request BofA to reduce a $21k limit to $6k. From what a loan officer explained when the issuing company reports the activity it is how they report it.

    I am not too worried the average score is aroud 730.

    Something interesting. After I posted this I wanted to change the type of Citicard I had. The rep said it would be easier to take a portion of my creidt limit and split it to another type of card. So keep $40k on 1 card and move $17 to the other one. So the new card will be carried and the other card will be put away.
     
  15. Shaun.P macrumors 68000

    Shaun.P

    Joined:
    Jul 14, 2003
    Location:
    Omicron Persei 8
    #15
    If you have too much credit available is could negatively effect your score.

    However, if you debt to credit ratio is high, then your score will be low. Aim for a debt to credit ratio of less than 1/3.

    Make sure you don't make more than 2 applications for credit in any period of six months. Anymore than 2 searches will begin to negatively effect your score.

    If cancelling this credit card will shoot up your debt to credit ratio, then do not cancel the card.
     

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