Early Retiree Credit (Card) Limits?

[UserRequested]

Quote:

Originally Posted by Lakedog Most credit cards I have offer to increase the credit limit every year or two, and I assume this is primarily due to credit score and paying the balance monthly. In fact, since I retired five years ago, Penfed has slowly raised my limit from the initial $12k to $35k without a single request from me. I rarely have monthly charges over $2500 but it doesn't bother me if they want to increase the limit since there might be a time when I would want to use it.

You just need to be vigilant against fraudulent transactions on your card. Make sure you understand the disputes and chargebacks conditions on your card.
Obviously the higher the limit, the larger the potential $ fraud on your card.

Most card issuers will reverse the charge if you reported a stolen card in a timely manner , or disputed any "card not present" transactions early.

[Koolau]

Quote:

Originally Posted by JOHNNIE36 This is one sure way to get your credit score lowered. Times have changed. Now the credit companies look at the credit ratio, or the amount of available credit you have. The lower the ratio, the lower your score and that is why I go to all the card companies every year and get my credit limit raised.

Never actually tried this, but another way to get your FICO score up (I'm speculating) would be to pay off your CC bill "in advance". When we sought a mortgage, we had a great score (around 820) but we found out it would have been even higher had we not used so much of our outstanding CC limit for our monthly transactions (roughly $5k out of $15K). Even though ALWAYS paid in full at the end of the month, the ratio cost us FICO score! We had very little income, so getting a higher limit would likely have been arduous, though not impossible. Here is what I speculate would be an EASY way to raise FICO score: "Cash" in a checking account, bank account or other (no longer) interest producing vehicle could be sent to the CC company a month before it is used. It's the reverse of the "float", but costs you virtually nothing since you no longer earn any interest to lose. BUT, now the rating agencies see that your ratio of debt to available credit is suddenly virtually nil. Your score should go up. Never actually tried it, but I feel certain it would work. While working this little piece of "magic" you could be attempting to get your credit limit increased if you really want to. YMMV

[JakeBrake]

April through June will be a good time to charge home improvements to your credit card(s).

Discover Card is offering 5% cashback on home improvements (whatever that means). If I do anything serious, I will call Discover for clarification.

Chase Freedom is offering 5% cash back at Lowes.

[daylatedollarshort]

Quote:

Originally Posted by JOHNNIE36 This is one sure way to get your credit score lowered. Times have changed. Now the credit companies look at the credit ratio, or the amount of available credit you have. The lower the ratio, the lower your score and that is why I go to all the card companies every year and get my credit limit raised.

We were denied a card one time because we had too high of limits on our other cards, which had been raised without our asking. I got the new card by having the other card limits lowered. There is not an infinite amount of unused credit one can have available and still get more. Credit ratio is one of many factors that go into a person's FICO score.

I am not sure what you mean by times have changed. We have very high credit scores. I monitor our FICO scores very closely.

[Katsmeow]

In general, it is usually a bad idea to close credit cards or get limits lowered particularly if you use your other cards - even if paid off in full.

That is, someone who has $20,000 of total credit limits available and spends $5000 this month on Amex, gets the bill and pays it promptly will show on a credit report as having 25% credit utilization.

The person who has $100,000 of total credit limits available in the same situation has 5% credit utilization. This person will - all things being equal - have a higher credit score than the first person.

I have for many years always paid my Amex charges online before they are billed. I spend way more each month than actually ever gets billed so my credit utilization always looks great.

For the OP's question - I just include in any income questions the amount of DH's withdrawals from his IRA. We also used that in obtaining a mortgage last year (this needed to be set up as a regular automatic withdrawal and there had to be at least enough in the IRA to cover 3 years of payments).

[daylatedollarshort]

Quote:

Originally Posted by Katsmeow In general, it is usually a bad idea to close credit cards or get limits lowered particularly if you use your other cards - even if paid off in full. That is, someone who has $20,000 of total credit limits available and spends $5000 this month on Amex, gets the bill and pays it promptly will show on a credit report as having 25% credit utilization. The person who has $100,000 of total credit limits available in the same situation has 5% credit utilization. This person will - all things being equal - have a higher credit score than the first person.

Lenders also consider at how high your combined existing credit lines are. If you do the Fatwallet approach of making extra income from rewards and sign up bonuses, you can't have an infinite number of cards open all with high available lines of credit.

[Katsmeow]

Quote:

Originally Posted by daylatedollarshort Lenders also consider at how high your combined existing credit lines are. If you do the Fatwallet approach of making extra income from rewards and sign up bonuses, you can't have an infinite number of cards open all with high available lines of credit.

Not in my experience. I obtained a mortgage last fall and we have existing credit card limits of well over $150,000. My FICO credit score was well over 800. I have not found that having high limits causes any kind of negative effect.

For the vast majority of lenders they are going to base lending on credit score and income. While an individual lender could theoretically deny credit for reasons that don't negatively impact your credit score - such as high limits - I would hazard that that is extremely unlikely. Of course, it could happen, but would be a blue moon sort of event. The more likely harm would come from reducing limits. This is because what does negatively impact your credit score is utilization over about 10% of your credit available. Therefore, lowering limits is far more likely to result in denial of credit due to lower credit score due to higher utilization.

The factors used to determine FICO score are:

Payment history - 35%
Amounts owed - 30% (this includes utilization and is directly impacted in a negative way by lower limits - this is impacted in a positive way by higher limits)
Length of credit history - 15%
New credit - 10% (they look negatively at someone going out and getting a bunch of credit at once - it is the newness of the credit that is the problem, btw, not the amount of the credit)
Type of credit - 10%

FICO Credit Score Chart: How credit scores are calculated

Amount of total credit available is not a factor except as it relates to utilization where more credit is favorable.

Again, I am not doubting that an individual lender could decide to not loan based upon high limits. What I am saying is that that is more unlikely than a lender refusing to loan because one's credit score is lower due to what appears to be more than 10% utilization of credit. People with few credit cards and little available overall credit can easily go over 10% utilization even with routine charging that is paid off in full each month.

[daylatedollarshort]

Quote:

Originally Posted by Katsmeow Not in my experience. I obtained a mortgage last fall and we have existing credit card limits of well over $150,000. My FICO credit score was well over 800. I have not found that having high limits causes any kind of negative effect. For the vast majority of lenders they are going to base lending on credit score and income. While an individual lender could theoretically deny credit for reasons that don't negatively impact your credit score - such as high limits - I would hazard that that is extremely unlikely. Of course, it could happen, but would be a blue moon sort of event. The more likely harm would come from reducing limits. This is because what does negatively impact your credit score is utilization over about 10% of your credit available. Therefore, lowering limits is far more likely to result in denial of credit due to lower credit score due to higher utilization. The factors used to determine FICO score are: Payment history - 35% Amounts owed - 30% (this includes utilization and is directly impacted in a negative way by lower limits - this is impacted in a positive way by higher limits) Length of credit history - 15% New credit - 10% (they look negatively at someone going out and getting a bunch of credit at once - it is the newness of the credit that is the problem, btw, not the amount of the credit) Type of credit - 10% FICO Credit Score Chart: How credit scores are calculated Amount of total credit available is not a factor except as it relates to utilization where more credit is favorable. Again, I am not doubting that an individual lender could decide to not loan based upon high limits. What I am saying is that that is more unlikely than a lender refusing to loan because one's credit score is lower due to what appears to be more than 10% utilization of credit. People with few credit cards and little available overall credit can easily go over 10% utilization even with routine charging that is paid off in full each month.

"Be strategic about closing cards. Sometimes, credit card companies get nervous if a consumer has too much available credit...

Read more: Credit card application rejected? 3 steps to getting next one approved
Compare credit cards here

"Having too many credit cards and too much available credit can spook creditors who may worry about the potential of you getting in over your head in debt."

http://www.forbes.com/sites/financia...of-the-top-25/

[UserRequested]

Quote:

Originally Posted by Katsmeow Not in my experience. I obtained a mortgage last fall and we have existing credit card limits of well over $150,000.

Just curious. You have a card limit of $150 k.Card limits are usually monthly limits. So if this is right, your annual spend on a cards alone could be close to $2million.

Do you really spend this much, or are the cards just there for a rainy day.

[MichaelB]

Quote:

Originally Posted by Midpack What am I missing, in terms of CC limits in case we ever want another bank CC? Denied for life, or until age 70 with Soc Sec

A few years ago we decided to change our card to the Fidelity Visa. We submitted the online application, got the card, it came in the mail, I called to activate, and bang, it kicked in with a $2k credit limit. Far less than the card we were leaving behind, and also less than our regular monthly charges. We put everything we can on that card. I called, spoke to a guy, then his supervisor. The only thing I said was they needed to increase the credit limit to $N or cancel. No job or pension, retired, no SS. It took them all of 3 minutes once the word cancel came up. Actually, I was very apologetic, told them it was a big misunderstanding and that I would never have opened the card account knowing it would be such a crappy credit limit.

You don't need a job, but they do need a reason to increase your credit limit.

[braumeister]

Quote:

Originally Posted by grasshopper I always use line 37 on my 1040 as my income

Absolutely.
The Federal Gummint officially calls that number your Adjusted Gross Income, so why wouldn't you do the same?

Another thing I've noticed over the years, is that whenever I've come very close to a card limit a couple of times, they just automatically raised my limit.

[donheff]

Quote:

Originally Posted by ERD50 IIRC, when I had asked to have my CC limit raised substantially (kid's school accepts my Fidelity 2% Rewards Card), I just gave them the AGI from the most recent taxes. I don't even think they asked for any proof. If you have a good credit record, I think they just need a number to enter on their form. That was my impression. -ERD50

I used a reward card for my son's first year in 1992 but after that all the schools I looked at either stopped accepting cards or ran them through a service that imposed a percentage fee for using a CC for payment. Have you confirmed that you can use your reward card without a service fee?

[audreyh1]

Quote:

Originally Posted by Midpack We never pay interest on credit cards, but we like the convenience and the cash back like most. We've just begun a full kitchen remodel, that will probably be paid for in three chunks, so I thought why not put as much as possible on the CC for the cash back. So I called the CC folks and asked to increase our credit limit. Of course they asked what my income is, and since I have no pension or Soc Sec (yet), I have NO wage income. I was a little thrown, as I hadn't thought about it after more than 35 years with income. Fortunately DW still has a small wage income, and they increased the limit on that basis. But when DW retires in the next year or two, we'll have NO income! What am I missing, in terms of CC limits in case we ever want another bank CC? Denied for life, or until age 70 with Soc Sec

All the credit card apps I filled out lately asked for total annual income including income from investments. I had no problem getting the cards. I suspect folks withdrawing income from IRAs include that. And AMEX makes it pretty easy to request an increase. My new Costco Amex, I requested a limit increase just after about 3 months use, and it was raised no questions asked.

[ERD50]

Quote:

Originally Posted by donheff I used a reward card for my son's first year in 1992 but after that all the schools I looked at either stopped accepting cards or ran them through a service that imposed a percentage fee for using a CC for payment. Have you confirmed that you can use your reward card without a service fee?

Abso-positively yes. I was skeptical also, verified it every which way, and it all checked out, and has continued every semester. No catches. Have had two kids go to this school, one kid to another that did charge fees for CC, so I used their 'echeck' bank transfer option at that school.

I'd love to know what % of people take advantage of this, versus paying by the month and being charged a fee. I do recall at orientation, several mom/pops looking at each other and responding to the 'pay-by-month' option. I pulled the finance person to the side to verify the pay-up-front option with a Rewards Card. I mentioned to DW, if they have the money to pay the bill over the course of a year, how hard could it really be to have it all up-front?

One of those 'snowball' effects of LBYM and delayed gratification - having that tuition amount stashed away and ready to apply to a bill in one swoop, versus paying every month is a tangible difference in out-of-pocket.

-ERD50

[ERhoosier]

Quote:

Originally Posted by heeyy_joe Not sure, but usually an investment account statement or tax return copy will do the trick.

+1

Most CC app's allow you to note investment income.

[Midpack]

Quote:

Originally Posted by heeyy_joe Not sure, but usually an investment account statement or tax return copy will do the trick. Quote: Originally Posted by ERhoosier +1. Most CC app's allow you to note investment income.

My exchange was via phone but that sounds reasonable, though that might not have helped in 2008.

I was simply sharing an actual experience with Discover as food for thought, I'm sure I could work through it as needed in the no-income years ahead...

[ChiliPepr]

Quote:

Originally Posted by Koolau Never actually tried this, but another way to get your FICO score up (I'm speculating) would be to pay off your CC bill "in advance". When we sought a mortgage, we had a great score (around 820) but we found out it would have been even higher had we not used so much of our outstanding CC limit for our monthly transactions (roughly $5k out of $15K). Even though ALWAYS paid in full at the end of the month, the ratio cost us FICO score! We had very little income, so getting a higher limit would likely have been arduous, though not impossible. Here is what I speculate would be an EASY way to raise FICO score: "Cash" in a checking account, bank account or other (no longer) interest producing vehicle could be sent to the CC company a month before it is used.

A better way would be to "pay" your credit card bill online a couple days before your statement period closes. Where "ratio" is the statement balance/credit limit. If you pay early your statement balance would be only what you charged during the last couple days before the statement period closes.

[jazz4cash]

Quote:

Originally Posted by jags Just curious. You have a card limit of $150 k.Card limits are usually monthly limits. So if this is right, your annual spend on a cards alone could be close to $2million. Do you really spend this much, or are the cards just there for a rainy day.

None of my cards have monthly limits that I am aware of. The limits are on the balance. If I have 10 cards with a balance limit of 15K each, my total limit is $150k.

[Katsmeow]

Quote:

Originally Posted by jags Just curious. You have a card limit of $150 k.Card limits are usually monthly limits. So if this is right, your annual spend on a cards alone could be close to $2million. Do you really spend this much, or are the cards just there for a rainy day.

I have never had a card that had a monthly limit. They all have limits for the total balance. And, no, I don't spend that much. A number of years ago we did have excessive credit card debt when I decided it was important to get rid of it. One way we did it was by opening new accounts and getting 0% or very low interest rates through balance transfers. This helped us pay off the debt more quickly and to do it at low rates. Not believing in closing credit cards once the debt was paid off we kept the cards. Actually total available credit card limits at this point probably exceeds $200k. However, we mostly just use the Amex Blue Cash Preferred Card where we earn cash back. We pay the balance in full monthly. We have other MC/Visa cards which we rotate around using for places that won't take Amex. I expect that slowly creditors will close some of those cards since there are several we rarely use.

[calmloki]

Cheap SOB here, but consider picking up a couple signup bonus reward cards. Chase Sapphire was a good one, I just picked up $400 in signup bonus for $2500 spending in 3 months from Barclay bank's NFL card. So you get a card, Mrs. Midpack gets a card, you spend $5000 on the kitchen and get $800 credited to the card bill. 16% discount? thankyou please.

Google credit card signup bonus, beware and shun the annual fee that some companies charge up front. The NFL card has no annual fee and will go in the desk drawer.