Auto Loan rejected due to too much available credit. Should I reduce my CL? Is this actually a thing

[Anonymous]

I was trying to refinance my auto loan and found this CU in my town that had rates as low as 1.74% for 36 months. I have excellent credit and thought I might qualify. But they denied my application because I had too much available credit on credit cards. I have a total limit $87,000 across 9 credit cards of which I am using less than $1,000. My annual income is around $80k, so I thought I had a decent income to available credit ratio.

This is the first time I am denied credit due to too much available credit. Is this actually a valid reason? Should I close some cards, so I don't get denied in the future? I only use 2 of my 9 cards regularly

UPDATE:

Thanks for all the good advise. I decided to give one more shot at a differernt local CU (putting my money in the local community and all that) before going to the big leagues PENFED, DCU etc. And the local CU approved my refi at 2.45% so Im going with them.

[Anonymous]

Wow! Bummer. Now go find a new credit union that is not bush league. There are great ones out there, many are profiled here. Search. I have run a 1:1  ratio nearly my whole adult life, never been turned down for a car loan. 

[Anonymous]

I'd ask a manager for reconsideration, then close all my accounts if the credit union sticks to their guns. I would never even consider closing credit cards to appease the credit union.

I have over a quarter of a million dollars in open revolving lines at last count (with infinitesimally small utilization), which is easily around 4-5 times my current cross income. I've had no problem getting approved at credit unions.

[Anonymous]

Sounds like a very risk averse credit union,  I would just join Penfed and get your refi.

[jeffm4688]

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@Anonymous wrote:

I was trying to refinance my auto loan and found this CU in my town that had rates as low as 1.74% for 36 months. I have excellent credit and thought I might qualify. But they denied my application because I had too much available credit on credit cards. I have a total limit $87,000 across 9 credit cards of which I am using less than $1,000. My annual income is around $80k, so I thought I had a decent income to available credit ratio.

This is the first time I am denied credit due to too much available credit. Is this actually a valid reason? Should I close some cards, so I don't get denied in the future? I only use 2 of my 9 cards regularly

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Must be on heck of a conservative credit union, I report annual income slightly higher than yours but have $220K+ in limits and have only run into this issue once with a very small credit union. I choose not to close anything and I'd advise the same. 

[StartingOver10]

CUs manage their lending portfolios just like any other lender.  Sounds like the CU in your town doesn't really want any more auto loans right now. Do as the others suggest, use DCU or PenFed or one of the others in this huge country that are looking for a low risk customer just like you

[Gmood1]

That's the kind of CU I'D kick to the curb. No reason for you to close a CC. I also have a large amount of open credit. I was approved for two auto loans last year with no issues what so ever. Call Penfed and join the big leagues! 

[Watchmann]

Are you sure there isn't anything in your credit file that might be scaring off the CU?  I've never heard of being denied an auto loan because the buyer had too much credit, they might be using that excuse to cover for other reason(s).  I'd talk to the manager of the CU and ask for an explanation and justification for the denial.  They should be making their decision on your FICO score and amount of debt you are carrying and NOT on how much credit you have available on your cards.  Something doesn't add up.

[azguy13]

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@Watchmann wrote:

Are you sure there isn't anything in your credit file that might be scaring off the CU?  I've never heard of being denied an auto loan because the buyer had too much credit, they might be using that excuse to cover for other reason(s).  I'd talk to the manager of the CU and ask for an explanation and justification for the denial.  They should be making their decision on your FICO score and amount of debt you are carrying and NOT on how much credit you have available on your cards.  Something doesn't add up.

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It has happened a number of times with people from this board. It makes sense too. If you have the ability to overextend yourself to the point that you could not pay your auto loan then it is a risk. It is all risk management in the end and that ups the risk. 

[Anonymous]

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@azguy13 wrote:

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@Watchmann wrote:

Are you sure there isn't anything in your credit file that might be scaring off the CU?  I've never heard of being denied an auto loan because the buyer had too much credit, they might be using that excuse to cover for other reason(s).  I'd talk to the manager of the CU and ask for an explanation and justification for the denial.  They should be making their decision on your FICO score and amount of debt you are carrying and NOT on how much credit you have available on your cards.  Something doesn't add up.

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It has happened a number of times with people from this board. It makes sense too. If you have the ability to overextend yourself to the point that you could not pay your auto loan then it is a risk. It is all risk management in the end and that ups the risk. 

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During the recession this was pretty common, lenders got really nervous that folks with the ability to run up debts would so CC lenders cut limits and other lenders rejected loans on the same basis.  I follow the industry closely through Autonews an industry weekly and they have regularly published articles about delinquencies, negative equity and total exposure for loans. Many auto lenders have become more conservative in the last few months.  I wouldn't lose sleep over it Penfed will give you a loan in about 5 mins.