03-04-2009 06:30 AM
I am thinking of paying off 95% of a $9,000 balance on a Citi-backed Sears Mastercard - oldest card - to avoid a jump in interest from 7.24% to 21%. My card renews/expires/whatever in Sept. of this year and I want to keep a balance on so they don't arbitrarily close it (which I understand could seriously undermine my credit score).
I carry a $15,000 credit limit and understand these companies are chopping limits to just above your buydown level or declaring new credit limits. I was thinking of asking them to reduce my available credit by 50% instead.
Will it affect my score less if I am the one making the request to reduce CL or would I be better off letting them do whatever they want, including not changing the limit? I've been an excellent customer with a flawless payment history. The credit score simulator shows my score would shoot up to 844 with the paydown, but there is no option there to reflect reduced available credit.
Would appreciate any advice.
03-04-2009 06:52 AM
The common belief is that when CLOSING an account, it looks better if it closed by the consumer than closed by grantor (however, I have also seen information stating it doesn't make a difference). In response to your question, however, it would not make a difference if the CL was lowered by your request or if it was done by the grantor. The only way the available credit comes into play in regards to your score is with your UTL percentage, which is a large portion of your score. The only thing involved in the UTL calculation is your total revolving balances and your total available revolving credit (intstallment accounts are factored in too, but they are very minor compared to revolving). FICO does not care how the balances or the CL's got to where they are, all they care about is WHAT they are.
I am pretty sure your post was the first one I have read on hear that involved actually asking for a CLD Personally, I would not ask for a CLD because you may never get it back. While there is always the chance they will reduce it, there really isn't much you can do. Even if you do ask for a reduction, they will probably just reduce it to whatever THEY feel it should be at anyway, so your best bet would probably just do what most of the rest of us are doing--trying to stay under the radar with fingers crossed.
03-04-2009 06:58 AM
03-04-2009 07:08 AM
Lots of us have cards with "ridiculous limits" and while some will get CLD few cards are being closed because of high limits (especially if your scores are good). You are much more likely to have a card closed because you are not using it (at least every few months). My advice is to pay down your balances and switch to a PIF user. Charge a few things each month--regular bills, groceries etc. Then PIF. This will keep the cards active and cost you nothing (no interest). If your bank(s) decide to CLD you it won't matter much because your reported balances are low so your utilization does not change much. Basically, I guess what I am suggesting is to not stress about it
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