Should I contiune to increase my CC credit line?

[bigchiller]

My CC credit line is currently 20k. Should I continue to have it increased at every opportunity? My friend tells me that a unnecessarily high credit line can work against you. Banks considering you for a loan might think of you as a bankruptcy risk. Say, with a 50k credit line, you could max it, then declare bankruptcy, and majorly screw over the lenders.

Is this an issue?

 

[E equals MC2]

Isn't having a big credit line good? (BUT actual LOW debt to line ratio).

If you owe $2000, it's better to have a $20K limit than a $10K limit.

No?

 

[Cuda1447]

I agree with Einstein. Thats always what I've heard as well.

 

[mundane]

Not knowing much on the subject, I'd say the opposite. I thought financial institutions looked at the ratio of credit usage - if you have a 50k line, and aren't carrying a balance, it looks better than a 20k with no balance. They see that your cc company decided you were responsible enough (or more accurately, not liable to default) on the larger quota, and you've been responsible about not running up your balance.

 

[bigchiller]

Originally posted by: mundane
Not knowing much on the subject, I'd say the opposite. I thought financial institutions looked at the ratio of credit usage - if you have a 50k line, and aren't carrying a balance, it looks better than a 20k with no balance. They see that your cc company decided you were responsible enough (or more accurately, not liable to default) on the larger quota, and you've been responsible about not running up your balance.

Well yes, for the purposes of your credit score, 50k line with no balance is better than 20k line with no balance. But what if that 50k line person decided to max his cards and then file bankruptcy? I think there are circumstances where it is beneficial to knowingly file for bankruptcy like that... Not sure though, just what I was told.

 

[Tobolo]

Well are you planning to max it out and file bankruptcy? If not then get the increase at every opportunity.

 

[Aharami]

Originally posted by: mundane
Not knowing much on the subject, I'd say the opposite. I thought financial institutions looked at the ratio of credit usage - if you have a 50k line, and aren't carrying a balance, it looks better than a 20k with no balance. They see that your cc company decided you were responsible enough (or more accurately, not liable to default) on the larger quota, and you've been responsible about not running up your balance.

agree. read an article not too long ago about how they are about to change the way FICO scores are calculated. One the things they will look at now is how you're managing your credit. If you have a large limit but are only using a bit of it and paying it off in time, it will look better than having a smaller credit limit and using more of it.
Using $2K out of $50K looks better than using $2K out of $10K.

 

[onlyCOpunk]

Yeah as long as you aren't going to hog wild with the new slack keep raising it.

Raising your credit line isn't going to hurt your credit in any way. It's when you keep opening new lines of credit that hurt you, especially when you cancel them.

 

[kranky]

Who issued the card? That's a factor.

 

[EKKC]

i have 2 different AMEX credit cards and they give me $15k on each card. i hardly ever go over $5k total across the 2 and i always pay everything on time. i only use my other cards if they don't take AMEX
banks aren't getting a dime from responsible people like me!

hsbc premier gave me a card with "unlimited credit line" i dont know how that works. maybe i should use it and buy some high price hookers and go report a card lost.

 

[Riverhound777]

I would love to have a 50k credit. For some reason my credit cards have low limits. My highest is my new amex card with 10k, my others are around 6k. My credit rating is around 800 and I have never missed a payment. I guess the only problem could be I don't keep a balance.

 

[Ns1]

balances / total available credit = factor in credit scores

 

[mrCide]

As it's been said, the more credit vs balance you have the better it looks on your report.

 

[Aharami]

Originally posted by: Ns1
balances / total available credit = factor in credit scores

i never ever keep a balance. I always pay it off in full. and I have a very good FICO score. so Im not sure if keeping a balance is necessary for good credit rating

 

[Chryso]

Can we please get a credit score forum?

 

[kranky]

Keep in mind that with the current state of the credit industry, the strategies that used to be commonplace may not be appropriate any more.

For example - AmEx has closed accounts of some people who carried a balance and then applied for a higher CL or simply got a new card from another issuer. Nobody has figured out the criteria they are using. Seems to be random, but of course it's not. Some computer program is determining who gets the ax.

The way things are now, I would avoid asking for CL increases and keep utilization low. And even if you pay in full every month, if you're going to charge a much higher amount than normal, use a card you can live without, because that has caused some people to have their CL's lowered dramatically or their account canceled. Banks are getting nervous.

 

[Ns1]

Originally posted by: Aharami

Originally posted by: Ns1
balances / total available credit = factor in credit scores

i never ever keep a balance. I always pay it off in full. and I have a very good FICO score. so Im not sure if keeping a balance is necessary for good credit rating

That wasn't what the message meant. With respect to credit scores, 0 balance / total available credit = best. A lot of times (not always), CC issuers will match what other companies give you, so it's helpful to have large lines.

 

[Aharami]

ah gotcha. but that applies in moderation. Doesnt look good to have too many open CC accts that are being unused either.

 

[Ns1]

Originally posted by: Aharami
ah gotcha. but that applies in moderation. Doesnt look good to have too many open CC accts that are being unused either.

It goes deeper than that. Because after the ratio above, you gotta factor in average age of all accounts, recently opened accounts, inquiries, etc.

I see no problem with having 10 cards, 10k limit each, with low/no balance that you've had for 10 years. There is a problem with 1 card 8 years old, and 9 cards opened 6 months ago though.

There are guys on other boards I frequent with 20-30 cc's, 6 digit available credit, and high 700 credit scorse.

 

[StageLeft]

FWIW I think the formula for fico is changing or has changed this year. I wouldn't worry too much, though about it either way. I have a card that started with a $2500 limit in 2001 and has self-grown up to $19,800 now. I will just let bankofamerica run it up as high as they want. I have an exceptional credit score and would only use all that credit if it was the end of the world anyway.

 

[Ns1]

Originally posted by: Skoorb
FWIW I think the formula for fico is changing or has changed this year. I wouldn't worry too much, though about it either way. I have a card that started with a $2500 limit in 2001 and has self-grown up to $19,800 now. I will just let bankofamerica run it up as high as they want. I have an exceptional credit score and would only use all that credit if it was the end of the world anyway.

Yup, Fico 2008. I hear balances will account for a larger %, inquiries less. Haven't read too much on it yet.

 

[Xavier434]

Debt to income ratio is a concern whenever you are applying for a loan or anything where you credit is being considered. That same ratio takes into consideration your available credit since you can be $0 in debt one day but $50,000 in debt the next day. Thus, making you higher risk if you have way too much available credit.



So, what you want to do is the following:

1. Distinguish between your "good" debt and "bad" debt. Good debt is anything which increases in equity or holds value such as a mortgage or student loans. Bad debt included credit cards, car loans, and anything else which decreases in value over time or cannot potentially increase in value.
2. Figure out what your debt to income ratio is by considering your bad debt plus your available credit divided by your income.
3. Once you figure out 1 and 2, you will want to shoot for getting your debt to income ratio to be around 30% or lower for the best results.
4. Once you complete step 3, start placing some money on each of your credit cards but keep it minimal. Even $50 will do just fine. Make sure it stays on the card for at least one billing cycle. That way, every month your credit report will show that you are using your credit as opposed to a zero balance card which is equivalent to no credit.

Lastly, remember that no credit is just as risky as bad credit in the eyes of many lenders (this was told to me by the Bank of America branch manager). So, you do not want to rack up tons of years with no debt to your name. Having a few bucks on each of your CC's is what accumulates the valuable history that lenders like to see when it comes to your credit report.

 

[Gooberlx2]

Originally posted by: bigchiller
My CC credit line is currently 20k. Should I continue to have it increased at every opportunity? My friend tells me that a unnecessarily high credit line can work against you. Banks considering you for a loan might think of you as a bankruptcy risk. Say, with a 50k credit line, you could max it, then declare bankruptcy, and majorly screw over the lenders.

Is this an issue?

That's what I've heard. A low debt-to-income ratio is great. However, there's also a balance to be maintained between your credit line and your income level; especially if risk is being factored in by the loan company.

 

[palswim]

I have a Providian card, which reports on my credit score for me, and gives me primary reasons why my score isn't higher. My score dropped 30 points in February (I assume this happened because of the new formulas) and one of the (two) primary reasons was:

You have a relatively high number of accounts with balances

I have probably 15 cards and use 4-6 of them with any frequency, but only two or three of them will ever have balances over $200. So, it looks like the new credit scoring doesn't like little utilization, either.

 

[Xavier434]

Originally posted by: palswim
I have a Providian card, which reports on my credit score for me, and gives me primary reasons why my score isn't higher. My score dropped 30 points in February (I assume this happened because of the new formulas) and one of the (two) primary reasons was:

You have a relatively high number of accounts with balances

I have probably 15 cards and use 4-6 of them with any frequency, but only two or three of them will ever have balances over $200. So, it looks like the new credit scoring doesn't like little utilization, either.

It never did like little to no use, but the new scoring could very well take it more seriously now. *shrug*

I really should get a new report done. I haven't check mine post Feb yet.