Credit Line Increase

[Gelfin]

They stopped automatically raising my limit years ago, probably because I don't ever increase my spending in response. I always got a good laugh out of the letters they would send flattering me about my financial responsibility, congratulating me on meriting a credit limit increase, and then encouraging me to go out and treat myself to something nice as if that makes any sense at all.

I have to wonder how many people fall for that.

 

[Mousse]

No, but now that you mention it, I think I'll start a thread asking MR forum members whether I should or not.

I'd say it's best NOT to increase your credit limit.

My credit limits randomly increase on their own.

That happens to me all the time. I started with a $1500 credit limit 20 years ago. Now it's ballooned to well over $200,000. That's enough to buy a house in parts of the US. As if, I'd buy a house on a credit card. Sure I don't mind paying a 20% mortgage rate.

They stopped automatically raising my limit years ago, probably because I don't ever increase my spending in response.

Wish they'd stop increasing my credit as well. My balance at the end of the month is always zero. One of these days I'll have to ring them up and have my limit lowered to $5,000.

 

[splitpea]

That happens to me all the time. I started with a $1500 credit limit 20 years ago. Now it's ballooned to well over $200,000.

Wish they'd stop increasing my credit as well. My balance at the end of the month is always zero. One of these days I'll have to ring them up and have my limit lowered to $5,000.

Don't bother. If you don't ever carry a balance, what's the harm in having a high limit? It's actually great for your credit rating to have a high limit and low balance.

 

[notjustjay]

Don't bother. If you don't ever carry a balance, what's the harm in having a high limit? It's actually great for your credit rating to have a high limit and low balance.

I keep hearing conflicting reports about this, because while what you say is true, it is also possible that you could theoretically go out and spend $200K in one day and become financially unstable overnight. I don't know which factor a bank considering you for a mortgage or a loan would consider more important.

 

[splitpea]

I keep hearing conflicting reports about this, because while what you say is true, it is also possible that you could theoretically go out and spend $200K in one day and become financially unstable overnight. I don't know which factor a bank considering you for a mortgage or a loan would consider more important.

Credit reports also show your history. If you have a 10-year history of being extremely financially responsible, that means more to a bank than how much credit you have available. The sheer availability of that credit means someone else has reason to trust you to pay back your bills. After all, even if you only have a $5K limit on one card, what's to stop you from taking out 40 cards and spending $200K overnight?

BTW, the info on the credit/debt ratio and credit ratings was explained to me by someone whose job is interpreting credit reports.

 

[barr08]

This is kind of on the same topic - I want to know more about how outstanding CC debt affects your credit score. Since I ran into a little bit of trouble and needed money fast, I have been sitting on a balance that's about 80% of my limit. I am slowly paying this off at roughly $200-300 per month. How could this affect my credit score?

 

[Gelfin]

I keep hearing conflicting reports about this, because while what you say is true, it is also possible that you could theoretically go out and spend $200K in one day and become financially unstable overnight. I don't know which factor a bank considering you for a mortgage or a loan would consider more important.

That possibility was a strong factor in calculating credit scores in the past, which is why you still hear conventional wisdom telling you to close unused cards and have limits lowered.

More recently, however, the credit reporting agencies have changed their methods to much more heavily weight percentage of credit in use. Now that's not to say that if you quit your job as Warren Buffett and get a job slinging mochas at Starbucks your Amex Black won't become a liability, but in general the current policy skews heavily in favor of keeping accounts open.

One of the reasons for this is that in recent years the speculative asset value of your ability to borrow a financially suicidal amount of money has been considered more valuable to credit card companies and their investors than managing the risk that you won't be able to pay back what you borrow. If this seems f***ed up to you then, congratulations, you are officially smarter than all of Wall Street over the past ten years.

As far as I know, recalculating credit scores according to the more sensible older metric is not something that's happened in response to the financial crisis.

 

[dukebound85]

Why would you be so stupid as to make it easier to go further in debt?

Easier to get in debt? Please

I pay the balance in full all the time. never carry a balance fro statement to statement.

CC are nice to have though when you need them....

I dont know what type of person thinks CC are "free money"

 

[rdowns]

Easier to get in debt? Please

I pay the balance in full all the time. never carry a balance fro statement to statement.

CC are nice to have though when you need them....

I dont know what type of person thinks CC are "free money"

Based on my professional opinion, Shivetya is projecting. It seems he lacked the maturity or self-control upon obtaining credit and now believes all others would end up like him. It happens to many people, there's no shame in it.

 

[notjustjay]

I dont know what type of person thinks CC are "free money"

Sadly, I know people who do think this way.

Well, obviously they don't really think it's "free" money, but they think "oh, well, I need to buy this now, and even though I can't afford it now, I can pay it back next month when my fortunes will surely have taken a turn for the better..." Well guess what, that day never seems to come...

 

[sushi]

Dear Lord, trying to keep track of all those bills and accounts would give me a headache

Agree with that -- too complicated.

In her case, it allowed her to renovate real estate and make money. So for her, it was part of the business.

I have to wonder how many people fall for that.

I would assume many since they keep making the offers.

I started with a $1500 credit limit 20 years ago. Now it's ballooned to well over $200,000.

Curious. How much do you charge monthly?

In my case I have one card that started out around 5K and now is up around 50K. I charge about $20-50 per year to keep it active.