Credit card limit increases - good, bad?

[steelyman]

I got a letter from a card saying I can get an increase in credit limit. I never even approach my current limit, and the card is autopaid in full each month.

I am considering, but wonder if it would negatively impact score/report. Anyone know?

I'd ask Suze, but then I'd have to look at her teeth and she'd call me "girlfriend".

 

[akck]

Probably more good than bad because your utilization percentage goes down.

 

[JOHNNIE36]

Yes, an increase in your credit limit will have a positive impact on your credit score. About every six months I go for credit increases on four or five of my cards. I never approach the limits. I have one card with a $25K limit and two with $20K limits. The ratio of card debit to available credit
is very important. Remember, when you pull a credit score check, it is just a snapshot in time and could change the very next day with the addition of debt or the payoff of a card. Don't get too hung up on the number but check it now and then. I like creditkarma.com as it can give you a running report on your file.

 

[steelyman]

Alright, I just contacted the company, asked them too, and they confirmed what you guys said. So I have a higher limit, but I don't see actually using it in the forseeable future.

Thanks for the feedback.

 

[daylatedollarshort]

We had a home loan turned down once because they said we had too much available credit, in large part because the credit card companies raised the limits on our cards without us asking. We didn't have any balances on the cards, but the underwriters didn't like seeing the high limits, nonetheless.

So I had to call around and ask to have our our limits lowered. The first time I did that the service rep at the cc company laughed and said she had never had anyone ask for a lower limit before.

I also had to have our personal credit card limits lowered in order to get credit cards for the businesses. Again we didn't have any debt balance other than a mortgage, but they said our available amount of credit was too high.

 

[marc515]

daylatedollarshort, I think you hit the nail on the head about too much available credit, or what they call "Presumed Debt"

These credit card companies want your business and want you to charge more, so they periodically increase you credit limits without asking.

While one may feel good about the large credit limits on their cards, we often overlook the total amount of "Presumed Debt" we are carrying. Too much presumed debt can cause you to be turned down for a loan at some time, and that I would think will hurt your credit score.

I want to lower the credit limits on our CC's, but I want to ensure it will have no bad affect on our credit card score.

 

[JOHNNIE36]

I agree, that used to be the case as I understand it. Some years back a mortgage broker told me that the more available credit you had the harder it was to get a loan. The thinking was that once you got the loan you were then able to go out and charge a bunch of stuff and not have the ability to pay the mortgage. Why that thinking changed I don't know, I know that high credit limits will increase you credit score.

 

[steelyman]

I agree, that used to be the case as I understand it. Some years back a mortgage broker told me that the more available credit you had the harder it was to get a loan. The thinking was that once you got the loan you were then able to go out and charge a bunch of stuff and not have the ability to pay the mortgage. Why that thinking changed I don't know, I know that high credit limits will increase you credit score.

Payment history and income are what they were interested in. They asked "what do you do?", and I said "well, I'm retired", and that made me think of this joint

 

[jollystomper]

I agree, that used to be the case as I understand it. Some years back a mortgage broker told me that the more available credit you had the harder it was to get a loan. The thinking was that once you got the loan you were then able to go out and charge a bunch of stuff and not have the ability to pay the mortgage. Why that thinking changed I don't know, I know that high credit limits will increase you credit score.

When we refinanced earlier this we talked to our banker about this, they say that they look at the pattern of used vs. presumed debt. If the used debt has been consistently below a certain level as compared to presumed debt, they aren't concerned about someone going out and charging things up and having problems paying the mortgage. In addition, liquid assets plus payment history helps them judge if even increasing the used debt would be an issue - e.g. if your liquid assets are some multiple of your credit limits they aren't concerned.

 

[MBAustin]

I have encouraged DD and DS (working, in their 20s) to get their credit limits raised every 6-12 months to give them an emergency cushion option. Worked well for DD several months ago, who has a high-deductible insurance plan and was injured seriously enough for EMS to be called (fortunately she was released from the ER after some stitches and lots of expensive tests). The hospital offered her a huge discount on the balance remaining if she paid it immediately, so out came the credit card, and she paid it off by moving some other money around later in the month.

Of course, you have to have the discipline to only use it in catastrophic circumstances and to pay it off ASAP.

 

[daylatedollarshort]

I use the myfico score monitoring for $15 a month. I usually don't like adding on recurring expenses, but for me knowing what my FICO score is from month to month and how different things we do financially change it have been worth the money to me.

I would like to start playing the frequent flyer rewards points games, so I want to be able to see how many cards with bonus points I can open and how often and still be able to keep my FICO score high enough to buy a vacation house or rental if I ever wanted to do that.

So far I have learned that our credit score doesn't change much month to month. The only time it went down more than a few points was when I asked our credit union for a pre-qualifying letter on a second home. They actually did a credit check and gave us a pre-approval letter instead of pre-qualifying letter for a second house, and even that didn't really impact our score much.

 

[Katsmeow]

I want to lower the credit limits on our CC's, but I want to ensure it will have no bad affect on our credit card score.

It will have a bad affect on your credit score.

Theoretically, a specific creditor could deny credit to you for any (legal) reason including the fact that you have X amount of available credit.

That is, high available credit as I understand it helps your credit score and does not hurt it. However, in rare instances a specific credit could say you have too much credit available and deny a loan, independent of your credit score. That said, my understanding is that this is exceedingly rare. You are far more likely to have a loan denied due to lower credit score than due to having a high credit score + high limits.

 

[daylatedollarshort]

I am not sure that I buy into the consumer culture idea that having super high credit limits are a good thing. I resent the cc cards raising our card limits without our approval. This tactic is what gets a lot of of consumers into trouble. Maybe not me, but it certainly does get some of my friends and family members into more debt.

After a certain point, does it matter for any reason if your credit score is 760 or 800 or 810? Especially if you are not interested in maxing out you borrowing limits?

 

[MichaelB]

I am not sure that I buy into the consumer culture idea that having super high credit limits are a good thing. I resent the cc cards raising our card limits without our approval. This tactic is what gets a lot of of consumers into trouble. Maybe not me, but it certainly does get some of my friends and family members into more debt.

After a certain point, does it matter for any reason if your credit score is 760 or 800 or 810? Especially if you are not interested in maxing out you borrowing limits?

Unfortunately, others are interested in your credit score and use it to determine if they want your business and how they will price it. Auto insurance is one example.

 

[daylatedollarshort]

Unfortunately, others are interested in your credit score and use it to determine if they want your business and how they will price it. Auto insurance is one example.

But once you are in the excellent range, does it matter where in the range you are?

 

[marc515]

I am not sure that I buy into the consumer culture idea that having super high credit limits are a good thing. I resent the cc cards raising our card limits without our approval. This tactic is what gets a lot of of consumers into trouble. Maybe not me, but it certainly does get some of my friends and family members into more debt.

I also resent them continually raising our CC limits. How many CCs do we need with $20,000+ limits. CCs with higher limits Helps to create overspending problems.

 

[Katsmeow]

But once you are in the excellent range, does it matter where in the range you are?

I think not. However, little things can vary your credit score. For example, a few months ago I found that my credit score abruptly went down 20 points because I didn't have enough utilization. I paid off my Amex bill before it was billed so my utilization was under 1% which actually made my score go down. If that was enough to lower my score from the highest band to the next then it might have been an issue.

 

[Katsmeow]

I also resent them continually raising our CC limits. How many CCs do we need with $20,000+ limits. CCs with higher limits Helps to create overspending problems.

Only if you are inclined to overspend. Back some years ago, I was inclined to overspend and raising my limits did encourage me to overspend. But, I saw the light and quit doing that. And, now, raising limits doesn't encourage me to overspend at all since I always pay my full bill monthly.

 

[foxfirev5]

Unfortunately, others are interested in your credit score and use it to determine if they want your business and how they will price it. Auto insurance is one example.

Once you reach a reasonable level ( the number varies considerably) above 750 or so nothing matters too much. I used to fret over maintaining an 800 score but nothing was gained from this effort. I then investigated and found that if my insurance co score dropped to 650 it would cost me a whopping $3 per month.