High limits, low balances... Good or bad?

[Anonymous]

Hi,

I have good credit, but I'd like to make the most of what I have and I'm not sure how my credit cards factor into the equation. I currently have the following cards:

Key Visa: opened 1996, limit $21,100, balance 0
Discover: opened 2002, limit $14,800, balance $1000 - $2000
Discover: opened 2007, limit $8,000, balance $100 - $500
Chase Visa: opened 1997, limit $6,500, balance 0
Chase MC: opened 1995, limit $500, balance 0

The "balance" is what I run up on the cards each month, by the way. All of the cards are paid in full at the end of each month. It's unclear to me if PIF balances will appear on my report or not.

I mostly use the Discover cards because of the cashback bonus, but I honestly don't have much use for the others. I've seen other threads here and elsewhere that advise against closing unused accounts and the logic behind that makes sense to me.

I just worry that my available credit has gotten out of hand as the years have passed. Would my FICO score improve if I lowered my limits?

Thanks,
-Shawn

[MidnightVoice]

Well, in order to keep Tuscani quiet, I suggest you read the Credit Scoring 101 thread and tell us what your credit scores are 

Your CCCs usually report your statement balance, so the CRA has only that to go on.  So the important factor is your utilization percentage (amount of use of total credit lines available).  Yours is pretty low, even on the cards you use, and I am NOT going to do the math.

If you close cards you will keep the history (they hang around 10 years after closing) but loose the CL, so your utilzation will go up.  Ig they are not costing you money, and you don't use them, why close them?  Of course, if you never use them they might get closed for inactivity anyway!

Loweing your limits would also increase your utilzation.

Do you have a reason for worrying about your credit scores?

[SpecFile]

Wow!  If they aren't costing you anything, I would leave them as they are.  Would love to see your scores!

[Anonymous]

Thanks Midnight. I've seen the info in the Credit Scoring 101 thread. I believe the relevant portion is as follows:

30% affects Utilization. It is best to have several accounts with low balances distributed then it is to have fewer accounts maxed out.

I seems to me that this part of the scoring calculation makes a bigger difference for accounts that have a substantial balance. Since I have zero or low balances, my theory is that reducing my limits would not affect my utilization very much. I certainly don't plan on closing any of the accounts, but I am concerned that the merely having that much credit at my immediate disposal might be affecting my score.

I'm about to look into a home equity loan or line so I just want to make sure that I go in with my best foot forward.

Thanks,

-Shawn

[MidnightVoice]

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shawnsee wrote:

I'm about to look into a home equity loan or line so I just want to make sure that I go in with my best foot forward.

Thanks,

-Shawn

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I think most people here would suggest that it is absolutely essential to pull all 3 CRs and all three real FICO scores from here BEFORE applying for a loan.  That should answer most of your questions.  If they are over 720-750, it won't make any difference if you increase them

[Anonymous]

Hello Spec,

I'd actually like to see my scores too! I'll have a look at them as soon as I'm reasonably sure that I'm doing the right thing with these credit cards. For now all I know is that my report is clean, and the lender of my last loan told me I scored higher than 720.

Regards,

-Shawn

[Anonymous]

Thanks Again! I didn 't know that lenders would consider 720+ scores to be equivalent. If that's the case then I may be fretting over nothing, since as I said in my last post my score was better than 720 when I got my last loan in January...

I already pulled my reports from annualcreditreport.com, so my next step is to get the FICOs. I was going to wait until I maximized my score, but 720'ish is the high mark then I might as well pull the scores now too.

Thanks,

-Shawn

[MidnightVoice]

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shawnsee wrote:

Thanks Again! I didn 't know that lenders would consider 720+ scores to be equivalent. If that's the case then I may be fretting over nothing, since as I said in my last post my score was better than 720 when I got my last loan in January...

I already pulled my reports from annualcreditreport.com, so my next step is to get the FICOs. I was going to wait until I maximized my score, but 720'ish is the high mark then I might as well pull the scores now too.

Thanks,

-Shawn

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There is no ding on your report from pulling it yourself, so I would splurge and get all 3 reports and scores.

Then you will have a good idea how to tweak the scores if you can and hit 750 plus on the middle ones

[MidnightVoice]

http://money.cnn.com/galleries/2007/pf/0705/gallery.credit_score/index.html

Scores range from 300 to 850 - the higher the better, with anything above 760 being the most desirable.

Johnson estimates that you lose 1 point for every percent of your credit limit that you use. So if you have a total credit limit of $10,000 and have an outstanding balance of $4,000 (40%), your score would be 40 points lower than if you had a $0 balance.

I would add that the higher your score, the bigger the impact of high utilization, in my limited experience