Good "Rule of Thumb" for TOTAL CLs?

[Dw4250]

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@PlasticOrPlastic wrote:

As crazy as it is there seems to be no "ceiling" per se.  My cousin is 24, works at the mall (about 16k a year) and has credit cards totaling well over 50k in available credit.  I've recently just gotten to 15k total on a 60K income...I'm more than happy with that, my highest before this point was literally about $1100 dollars (which is probably a good thing for back in those days)  I think its based on how well you handle the credit...I would like to see how easy it would be to set off a red flag for my cousin though, think one late payment might be devestating! 

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It does appear there is no rhyme or reason to CLs .

I think you're right about how you handle your credit.  Your cousin has probably shown him/her self to be responsible.  The danger to the CCC's (at least in the case of your cousin) would be if God Forbid he lost his job or had another type of emergency.  I have to imagine he/she doesn't have a lot in 'reserve' and thus would be very tempted to charge up the cards with no hope of ever paying it back...I'm surprised CCC's do not take this into account the same way a mortgage lender would.

[awp317]

Im sure its a factor but credit is tricky. As I have said before my mother makes half of what I make and has the same credit limits and some are even higher, and she got them instantly, I have had to CLI mine as my income has grown. 

[Cdnewmanpac]

One thing that throws people off is they compare total credit limits to annual income. This isn't the relevant comparison. The comparison is monthly salary to total minimum payments if cards are maxed out. So a 25k limit, if maxed, has a minimum payment of approximately 1k. A single person making 50k/year has a take home somewhere around $3400/month. Some issuers use a formula assuming all cards are maxed. Others only count what they are issuing plus actual balances on other cards, loans/mortgages, etc. Point being, many people with lower salaries can easily make the minimum monthly payment on 3-4x their annual salary. As your income rises, it becomes more difficult to make the minimum on 2 or 3x your salary, since that 2x represents a much larger total. Minimum payment on 200k in credit card debt is around 8k, which would be above the monthly takehome of someone making 100k. 

[takeshi74]

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@Dw4250 wrote:

There seems to be quite a number of people on here with >$100K or even $200K+ in total CLs.  Are these people with very high incomes and/or business owners who require large CLs?  Or just average joes/janes with excellent credit management skills?

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The two aren't mutually exclusive.  Higher CL's aren't just handed out and it takes proper credit management.  I'm in the range you mention and my CL's are about 1.7x income.

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@Dw4250 wrote:

 I do not want to reach a point where my available credit is so high as to draw red flags from either CCC or other creditors (i.e. mortgage lenders).

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You can always address it if it becomes an issue.  Or find other creditors that aren't as concerned by it.  With some creditors it's really no big deal.  With Chase, for example, you can reallocate credit if you hit their internal limit.

[watch44]

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@Cdnewmanpac wrote:

One thing that throws people off is they compare total credit limits to annual income. This isn't the relevant comparison. The comparison is monthly salary to total minimum payments if cards are maxed out. So a 25k limit, if maxed, has a minimum payment of approximately 1k. A single person making 50k/year has a take home somewhere around $3400/month. Some issuers use a formula assuming all cards are maxed. Others only count what they are issuing plus actual balances on other cards, loans/mortgages, etc. Point being, many people with lower salaries can easily make the minimum monthly payment on 3-4x their annual salary. As your income rises, it becomes more difficult to make the minimum on 2 or 3x your salary, since that 2x represents a much larger total. Minimum payment on 200k in credit card debt is around 8k, which would be above the monthly takehome of someone making 100k. 

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I don't understand. If we're using 4% minimum payments, someone making 25k a year can't make the minimum on debt 2x their income (50k x 0.04 = 2k a month) just the same as someone with 100k income and 200k debt. 

(edit: But then it's a possible to service debt 3-4x income when the minimum is 1% of the principal balance every month as set by most banks (assuming < 12% APR obviously). My credit union sets the minimum at 2% otoh.) 

[TiggerDat]

You can have more in limits than your income.  I have 1.4 x what my income is.  I never use more than 10% of my total, in fact as a card become useless to me I put it in the sock drawer.  I put a small charge on them once in a while and then pay it off.  I especially have to do that once in a while just to get Comenity to report to the CBs.

[B335is]

After reading these posts I feel like I should be sat down in the corner for perpetual time-out.  I don't even want to say what my total limits to income is but it is far north of 3x.  RBS denied me for "sufficient credit" and others have obviously, but in not-so-specific terms.

[longtimelurker]

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@B335is wrote:

After reading these posts I feel like I should be sat down in the corner for perpetual time-out.  I don't even want to say what my total limits to income is but it is far north of 3x.  RBS denied me for "sufficient credit" and others have obviously, but in not-so-specific terms.

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Well, it's not really a problem unless and until you get rejected for too much credit for a card you REALLY want.   You may want to close some of your unneeded card if that is a continuing problem.

Or explain to your employer you need a big raise to get of this embarrasing situation.

[bk510]

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@Dw4250 wrote:

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@Josh2942 wrote:

No it does not work like that. Each lender does their own risk based lending based off of their underwriting practices. People with 50K income that I know have Lowes cards that have 30K alone in CL. Not to mention their other CL's. I would probably beileve that a persons total CL's would hit a ceiling to all lenders if it is more then 2x there "reported income". No bank truly knows your income unless they are in your checking.

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Wow that's crazy...I know Lowe's is pretty generous with the CL's.  

While it's true they don't know your actual income, can't they have a general idea based on how much you put on your card balances/month?  I think this info is now available on our CR.

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yes it does

[emptypockets]

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@B335is wrote:

After reading these posts I feel like I should be sat down in the corner for perpetual time-out.  I don't even want to say what my total limits to income is but it is far north of 3x.  RBS denied me for "sufficient credit" and others have obviously, but in not-so-specific terms.

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I'm in the same boat as you, at nearly 4x my income. Recently, I have not been requesting CLI's, but have received several auto CLI-s with very minimum use of some cards. For example, recently Pen Fed gave me a 3k auto CLI, after I charged and PIF'd a $30 charge, and Cabela's (which I had not been using except every 3 mos) gave me a 3.5k CLI after I charged and PIF'd a charge for $4.

I think CL's are somewhat related to income, but also strongly by your management of your credit (not maxing out cards, and not having balances across several different cards).

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