topic Re: Will this look bad to a creditor? in Credit Cards

Will this look bad to a creditor?

GoldenloveNY — Thu, 04 Oct 2012 04:16:18 GMT

I have a Discover More card that I just opened up 2 weeks ago. My credit limit is 1,000. However, after going through my monthly budget, I spend around $1,500. Should I use the card up to my limit, PIF, then continue using my card? Will I continue to earn cash back?

Re: Will this look bad to a creditor?

maiden_girl — Thu, 04 Oct 2012 04:22:32 GMT

GoldenloveNY wrote:
I have a Discover More card that I just opened up 2 weeks ago. My credit limit is 1,000. However, after going through my monthly budget, I spend around $1,500. Should I use the card up to my limit, PIF, then continue using my card? Will I continue to earn cash back?

No. Stop.

Discover will less likely extend you any more credit if you appear maxed out. They can even decrease your credit limit if you max out every month. Even if you PIF.

Re: Will this look bad to a creditor?

ionred — Thu, 04 Oct 2012 04:28:25 GMT

I'd use no more than about 50% of your limit and pay before your statement cuts to avoid any util issues.

Re: Will this look bad to a creditor?

GoldenloveNY — Thu, 04 Oct 2012 04:40:47 GMT

Thanks.

Re: Will this look bad to a creditor?

SwampSystems — Thu, 04 Oct 2012 05:22:48 GMT

maiden_girl wrote:
GoldenloveNY wrote:
I have a Discover More card that I just opened up 2 weeks ago. My credit limit is 1,000. However, after going through my monthly budget, I spend around $1,500. Should I use the card up to my limit, PIF, then continue using my card? Will I continue to earn cash back?
No. Stop.

Discover will less likely extend you any more credit if you appear maxed out. They can even decrease your credit limit if you max out every month. Even if you PIF.

I'm not sure why you would say that. Both of my Discover More auto-CLIs were granted after I maxed out my card and only paid the minimum every month.

Re: Will this look bad to a creditor?

Revelate — Thu, 04 Oct 2012 07:20:02 GMT

SwampSystems wrote:
maiden_girl wrote:
GoldenloveNY wrote:
I have a Discover More card that I just opened up 2 weeks ago. My credit limit is 1,000. However, after going through my monthly budget, I spend around $1,500. Should I use the card up to my limit, PIF, then continue using my card? Will I continue to earn cash back?
No. Stop.

Discover will less likely extend you any more credit if you appear maxed out. They can even decrease your credit limit if you max out every month. Even if you PIF.
I'm not sure why you would say that. Both of my Discover More auto-CLIs were granted after I maxed out my card and only paid the minimum every month.

Not certain I'd advocate only paying the minimum, but I agree that maxxing a tradeline isn't itself a problem. Lenders really don't care about a line that's maxxed in a given month, it's when that tradeline stays maxxed with a minimum payment month after month where they start getting edgy... and worse when your other revolving balances are also increasing.

I know the economic times are wonky, but the more you use a card, the more you demonstrate your financial ability and the more likely you are to receive CLI's with pretty much any lender in my opinion with few exceptions (*cough* C1).

Personally I run everything through a rewards card, at first was my BOFA 1-2-3 secured, and now my Zync (since the bulk of my spending is restaurants anyway), it not only demonstrates what I can reliably pay off, but also what my spend is, which helps not only with the lender in question, but every other lender as well. I don't see any downside to maxxing a card if you're PIFing, the only possible issue is one's FICO if you let that balance report, but that's easy enough to manage and since FICO has no memory on the revolving utilization calculation, so you can always fix that next month.

Re: Will this look bad to a creditor?

maiden_girl — Thu, 04 Oct 2012 06:03:18 GMT

SwampSystems wrote:
maiden_girl wrote:
GoldenloveNY wrote:
I have a Discover More card that I just opened up 2 weeks ago. My credit limit is 1,000. However, after going through my monthly budget, I spend around $1,500. Should I use the card up to my limit, PIF, then continue using my card? Will I continue to earn cash back?
No. Stop.

Discover will less likely extend you any more credit if you appear maxed out. They can even decrease your credit limit if you max out every month. Even if you PIF.
I'm not sure why you would say that. Both of my Discover More auto-CLIs were granted after I maxed out my card and only paid the minimum every month.

I don't know how you got an increase maxing the card out and only paying the minimum. Its never a good idea at any moment to do that even if you PIF monthly, IMO. It reports to the CR and next to CL is high balance and if someone happens to pull your CR and they see THAT they tend to not give as much credit b/c they are afraid you're not going to be able to afford/handle a large credit line. It's like having 10 credit cards and charging the full line on it just b/c you have it..

Re: Will this look bad to a creditor?

Dustink — Thu, 04 Oct 2012 06:08:29 GMT

You can max the card out and PIF as many times per month as you want. The creditor will actually see that you have a steady stream of income and simply need a larger line of credit. They will grant you a nice increase in 6 months. The only problem will be that it is likely reporting high utilization, this is only a problem if you are actively seeking new credit. Down the road when you seek new credit, just make sure the card is paid down to around 5% for a month before you apply for the new credit account.

Re: Will this look bad to a creditor?

kwazziee — Thu, 04 Oct 2012 06:12:21 GMT

Dustink wrote:

+1 I agree. This is what I have been doing since I have been rebuilding my credit and it has worked wonder for me with both getting new CC and CLI. I don't think the creditor really care about it as long as you pay them back.

Re: Will this look bad to a creditor?

Dustink — Thu, 04 Oct 2012 07:11:25 GMT

+1 I agree. This is what I have been doing since I have been rebuilding my credit and it has worked wonder for me with both getting new CC and CLI. I don't think the creditor really care about it as long as you pay them back.

Not only do they not care. They get a huge amount of merchant fee's from the charges you make. So they like it, and are glad to extend you more credit.

Re: Will this look bad to a creditor?

MrCredit — Thu, 04 Oct 2012 07:15:29 GMT

I agree with the others. The problem with Discover is that they are a pain in the rear with CLI. I kicked them to the curb after spending and PIF and getting no where with their lousy CL. There are so many other banks and CUs to go with-where their cards are more widely accepted, with lower rates and more generous CLs

Re: Will this look bad to a creditor?

Revelate — Thu, 04 Oct 2012 07:26:28 GMT

maiden_girl wrote:
I don't know how you got an increase maxing the card out and only paying the minimum. Its never a good idea at any moment to do that even if you PIF monthly, IMO. It reports to the CR and next to CL is high balance and if someone happens to pull your CR and they see THAT they tend to not give as much credit b/c they are afraid you're not going to be able to afford/handle a large credit line. It's like having 10 credit cards and charging the full line on it just b/c you have it..

Not sure on that honestly: personally I think the best way to demonstrate that you can actually handle a large credit line, is to use it, and then pay it back.

High balance isn't a problem by itself: if your current balance = your high balance when they pull that might be an issue besides the FICO utilization calc; however, if they pull and your current balance is way below your high balance, you look like a profitable customer... and one that another lender would like to get a piece of your financial pie from.

It used to be in the old days when limits weren't regularly reported, that the strategy was to max your card anyway regardless of tradeline, and then write a check for it. It's not required to do that anymore for most cards (BOFA Siggies and a few other exceptions unfortunately still exist) and this behavior never hurt anyone to my knowledge. It certainly hasn't for me so far even in my subprime strata, and all my high balances are within $25 of the limit or thereabouts until I got a 5K tradeline, that max is only around 3.5K as I had to refinance my car and couldn't float the balance that month.

Busily running up my Zync to whatever internal limit Amex allows right now too heh.

Re: Will this look bad to a creditor?

Dustink — Thu, 04 Oct 2012 07:35:01 GMT

MrCredit wrote:
I agree with the others. The problem with Discover is that they are a pain in the rear with CLI. I kicked them to the curb after spending and PIF and getting no where with their lousy CL. There are so many other banks and CUs to go with-where their cards are more widely accepted, with lower rates and more generous CLs

And better rewards.

Re: Will this look bad to a creditor?

MrCredit — Thu, 04 Oct 2012 07:38:42 GMT

+1. I particularly like the FIA Amex Rewards with 2% cash back on everything no caps, limits etc. I use that more than any other card I have and they deposit the cash right into my Fidelity stock account. They have a Visa card (for places not taking Amex) that has a 1.5% cash back rewards no caps limits etc. I have been ITCHING to apply for it but have held off on any new accounts for now.

I know FIA is not the best but still, I have made $$$ with this account.

Re: Will this look bad to a creditor?

Dustink — Thu, 04 Oct 2012 07:48:32 GMT

MrCredit wrote:
+1. I particularly like the FIA Amex Rewards with 2% cash back on everything no caps, limits etc. I use that more than any other card I have and they deposit the cash right into my Fidelity stock account. They have a Visa card (for places not taking Amex) that has a 1.5% cash back rewards no caps limits etc. I have been ITCHING to apply for it but have held off on any new accounts for now.

I know FIA is not the best but still, I have made $$$ with this account.

I like my Flexperks card from US Bank, but that is more for travel than cash back.

Re: Will this look bad to a creditor?

SwampSystems — Thu, 04 Oct 2012 19:51:10 GMT

Revelate wrote:

Not sure on that honestly: personally I think the best way to demonstrate that you can actually handle a large credit line, is to use it, and then pay it back.

That is what I eventually did. I kept the card completely maxed out for a year and received two $250 auto-CLIs in that time bringning me to double my original $500 limit. Then I paid it off in full and called an underwriter. It freaked her out enough to specifically ask me why I went from making the minimum payment every month to suddenly paying it off in full. I told her very plainly, I make more money now, and I've been paying off all of my cards in full starting with the highest interest rate cards. It was Discover's turn on the list. Told her I wanted to transfer the remaining balances to my Discover card and she upped me to my current $4500 limit.

I also got all of my GE Walmart and Capital One auto-CLIs by keeping the cards maxed out and only paying the minimum. Even with 90% utilization across the board, I was getting auto-CLIs. I haven't had a single auto-CLI since I started paying my cards in full. I have had to get manual reviews for all of the recent ones. Creditors want to see that you can manage your current limit.

It doesn't matter to them if you are paying in full, because they make money on interest if you don't. Utilization only counts for 30% of your score; payment history counts for 35% and is much more important of an indicator of a creditor's ability to make money off of you. Even with all of my cards maxed out, I had a perfect payment history and no negatives on my credit report, and I was getting prescreened offers in the mail left and right. Now that I'm paying off everything in full and not charging up to my limits, I've had creditors tell me specifically that they would want to see me use my cards more to give me any increases.

Re: Will this look bad to a creditor?

SubseaEngineer — Thu, 04 Oct 2012 20:42:15 GMT

Actually, I started with my Discover card in January of this year with the same limit.

In a month, I put about $3,500 through the card. Fill up, pay down, fill up, pay down, fill up, pay down.

After 6 months of making 5-6 payments a month, I called Discover and got an immediate increase to $4,000 CL.

After 2 more months (putting about $5,500 through the card), I got a CLI to $7,500.

So... my advice is the following:

1. If you pay it down to near zero on statement date, when Discover reports on the 17th of the month you will show limited balance. This is good for your utilization.

2. If you max out and pay down immediately, you are showing responsible behavior and a desire to give them business. Bofh of these behaviors are good for you them.

Keep in mind: Discover makes money on transaction fees. If you give them lots of transaction fees (i.e. make them lots of money) and show that you have the ability to pay for what you are charging, they are MUCH more likely to give you a CLI.

Re: Will this look bad to a creditor?

Burned2manybridgesB4 — Thu, 04 Oct 2012 22:47:56 GMT

@Gold
Let Disc become used to your typical spending habits, before pushing the limit on your card.
There is absolutely nothing wrong with maxing out a card, as long as you PIF....
UNLESS:

You're seeking other credit soon (high balance marker from OC)

You'll see some people here will chase every purchase with a payment, saying it's good.
Then you'll see others saying that it's good to run normally for the month, then make one payment (before posting date) for max fico effects.

Then you'll see some saying to let the balance post, but PIF for the great potential for a CLI.

MMMV....

Re: Will this look bad to a creditor?

GoldenloveNY — Fri, 05 Oct 2012 01:22:42 GMT

Thanks alot! Those were really helpful responses! I love this forum! I have learned alot from here....:smileyhappy:

Re: Will this look bad to a creditor?

Dustink — Fri, 05 Oct 2012 04:34:27 GMT

Also, opt out of over limit protection. They will still let you go over limit, but they can't charge you a fee for it and it doesn't count against you in any way. This is just in case you accidentally go over, you don't have to worry about it.