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## Stupid Question #1

Regular Contributor

## Stupid Question #1

Why is it not good to use what a lender gives you under the terms the lender set? On another thread a poster was asking about possible AA for being maxed out in all of his cards. We all know and accept, albeit reluctantly, that this makes a lender nervous.

But why?

Chase, for example, gives you a \$10k limit and you buy something for \$9,999. When you opened the account Chase told you that you were supposed to make at least minimum payments. You do.

Why do they give you \$10k and then penalize you for using it? If you come to my house and I put a glass of water and three apples in front of you, should I get upset because you eat all the apples and drink all the water?

If Chase wants you to only spend 1/3 of your limit, then shouldn't they give you a limit of \$6,666 instead of \$10,000?

Message 1 of 17
16 REPLIES
Valued Contributor

## Re: Stupid Question #1

McArthur wrote:

Why is it not good to use what a lender gives you under the terms the lender set? On another thread a poster was asking about possible AA for being maxed out in all of his cards. We all know and accept, albeit reluctantly, that this makes a lender nervous.

But why?

Chase, for example, gives you a \$10k limit and you buy something for \$9,999. When you opened the account Chase told you that you were supposed to make at least minimum payments. You do.

Why do they give you \$10k and then penalize you for using it? If you come to my house and I put a glass of water and three apples in front of you, should I get upset because you eat all the apples and drink all the water?

If Chase wants you to only spend 1/3 of your limit, then shouldn't they give you a limit of \$6,666 instead of \$10,000?

I think, in theory, AA is only considered where there is a pattern of up-to-the-limit on several cards, as this is a common sign on financial crisis/pending bankrupcy.

So Chase is saying, "You can spend up to \$10K", with the unstated assumption "providing you don't owe too much to others".  If Chase is the last card opened, then they should have some idea of potential obligations, but if it was the first card, it might have been reasonable to give you \$10K, but now I look with increasing anxiety as you pile on inquiries and sometimes successfully get new cards, which you then max out.

Not sure what else I can do other than reduce your CL.   I guess ideally the issuer should be able to state the unstated assumption "I am giving you 10K now.  Any future cards that you get may reduce your CL in the following way."

Message 2 of 17
Valued Contributor

## Re: Stupid Question #1

McArthur wrote:

Why is it not good to use what a lender gives you under the terms the lender set? On another thread a poster was asking about possible AA for being maxed out in all of his cards. We all know and accept, albeit reluctantly, that this makes a lender nervous.

But why?

Chase, for example, gives you a \$10k limit and you buy something for \$9,999. When you opened the account Chase told you that you were supposed to make at least minimum payments. You do.

Why do they give you \$10k and then penalize you for using it? If you come to my house and I put a glass of water and three apples in front of you, should I get upset because you eat all the apples and drink all the water?

If Chase wants you to only spend 1/3 of your limit, then shouldn't they give you a limit of \$6,666 instead of \$10,000?

Lenders want you to use the available credit offered to you, only they want you to use it responsibly.  Maxing out your cards is never a good idea for a long period of time.  FICO penializes you for using high utility on your accounts because it is a proven statistic that those that use the majority of their credit are at higher risk of default.  Banks know this and are reluctant to grant credit to those that are at a high utility %.  Most lenders won't take AA against you for the high utility, but you are limiting your ability to get more credit at a decent rate and gives your lender cause for alarm.

Starting Score: 642
Current Score: EQ 773, EX 780, TU 777 (All FICO)
Goal Score: 800+

Cards: NFCU Flagship 50K, DC 30K, BCP 28.6K, Arrival+ 25K, Citi DP 22.8K, CSR 20.5K, TotalRewards 25K, QuickSilver 20K

Message 3 of 17
Valued Contributor

## Re: Stupid Question #1

YOU CAN!

but if you max out multiple cards at once (which if im think about the same poster as you) it looks like you can't handle credit!

not that im saying you won't pay it back.

but think of if this way.

say i know you personally and i tell you oh i have 10k that i have as a reserve that you can have some and pay it back over time.

he never uses more then let's say 2k at a time. and always pays it back

and then i come to you and say hey i need the whole 10k? but i also take 10k from 3 other people all at the same time.

you would want to know when your going to get some or all of your money back correct?

when people leave a LARGE balance on a credit card some banks tend to balance chase. becuase they want to limit liability.

that's all their doing.

in my short 2 year credit history the largest balance ive carried was probably about 3k. and ive never had a min payment over 30 dollars because i dont carry my balances.

unless there is some formula to calculate min payment vs. balance

 Current: Discover Fico 709 3/15 Walmart Fico 743 4/15Inquiries (24 Months): EQ 6 TU 1 EX 6 | Most Recent: 4/09/2015Over 12 Months:9 2015 Goals:Lower UtilityEarn Cash Back Amex Zync(Unicorn) Chase Freedom\$1500Discover IT\$7,400Citi DC \$10,000Citizens Mastercard\$7,000
Message 4 of 17
Regular Contributor

## Re: Stupid Question #1

bs6054 wrote:

McArthur wrote:

Why is it not good to use what a lender gives you under the terms the lender set? On another thread a poster was asking about possible AA for being maxed out in all of his cards. We all know and accept, albeit reluctantly, that this makes a lender nervous.

But why?

Chase, for example, gives you a \$10k limit and you buy something for \$9,999. When you opened the account Chase told you that you were supposed to make at least minimum payments. You do.

Why do they give you \$10k and then penalize you for using it? If you come to my house and I put a glass of water and three apples in front of you, should I get upset because you eat all the apples and drink all the water?

If Chase wants you to only spend 1/3 of your limit, then shouldn't they give you a limit of \$6,666 instead of \$10,000?

I think, in theory, AA is only considered where there is a pattern of up-to-the-limit on several cards, as this is a common sign on financial crisis/pending bankrupcy.

So Chase is saying, "You can spend up to \$10K", with the unstated assumption "providing you don't owe too much to others".  If Chase is the last card opened, then they should have some idea of potential obligations, but if it was the first card, it might have been reasonable to give you \$10K, but now I look with increasing anxiety as you pile on inquiries and sometimes successfully get new cards, which you then max out.

Not sure what else I can do other than reduce your CL.   I guess ideally the issuer should be able to state the unstated assumption "I am giving you 10K now.  Any future cards that you get may reduce your CL in the following way."

Since Chase softs me monthly, they know I have increased my available credit by 500%.  Shouldn't they be proactive and CLD me automatically?

I mean, you and I both know the game rules and can skillfully play the game.  But most are not as educated as we are.  I have seen scores of cases where people have had all their cards maxed out, never missed payments and then had a lender take AA.  The resulting chain reaction of over limit fees, account closures, high util, penalty interest and even further AA from additional lenders pushed them to where now they can't make payments.

Sometimes I think lenders are directly responsible for pushing good people into financial ruin via a system of smoke and mirrors.

Message 5 of 17
Super Contributor

## Re: Stupid Question #1

creditnocash wrote:

YOU CAN!

but if you max out multiple cards at once (which if im think about the same poster as you) it looks like you can't handle credit!

not that im saying you won't pay it back.

but think of if this way.

say i know you personally and i tell you oh i have 10k that i have as a reserve that you can have some and pay it back over time.

he never uses more then let's say 2k at a time. and always pays it back

and then i come to you and say hey i need the whole 10k? but i also take 10k from 3 other people all at the same time.

you would want to know when your going to get some or all of your money back correct?

when people leave a LARGE balance on a credit card some banks tend to balance chase. becuase they want to limit liability.

that's all their doing.

in my short 2 year credit history the largest balance ive carried was probably about 3k. and ive never had a min payment over 30 dollars because i dont carry my balances.

unless there is some formula to calculate min payment vs. balance

There is. It is usually listed on the bottom of your T&C sheet somewhere. Something like 2-4% of your balance. But most banks make you pay the whole balance if it is less than a certain amount, I don't think a min payment is ever less than \$25.

Message 6 of 17
Highlighted
Valued Contributor

## Re: Stupid Question #1

I agree with the others. I saw my FICO score drop significantly when I reported a balance on 5 credit cards....at the same time! LOL. I'm able to pay it back...I just wanted to show usage but I didn't realize the affect it would have on my FICO until...well after the fact.

I say that if you do rack up a balance on a card with a 10k limit...have lots of available credit to keep your UTL low. Also pay more than the min so you don't freak the credit card company out thinking you won't pay them back.

As of 2017, rebuilding...
Message 7 of 17
Regular Contributor

## Re: Stupid Question #1

creditnocash wrote:

YOU CAN!

but if you max out multiple cards at once (which if im think about the same poster as you) it looks like you can't handle credit!

not that im saying you won't pay it back.

but think of if this way.

say i know you personally and i tell you oh i have 10k that i have as a reserve that you can have some and pay it back over time.

he never uses more then let's say 2k at a time. and always pays it back

and then i come to you and say hey i need the whole 10k? but i also take 10k from 3 other people all at the same time.

you would want to know when your going to get some or all of your money back correct?

when people leave a LARGE balance on a credit card some banks tend to balance chase. becuase they want to limit liability.

that's all their doing.

in my short 2 year credit history the largest balance ive carried was probably about 3k. and ive never had a min payment over 30 dollars because i dont carry my balances.

unless there is some formula to calculate min payment vs. balance

We are thinking of the same poster.

I agree with you and I also agree with improvingmycredit.  We, however, are sophisticated consumers.  I'd bet that the vast majority of credit consumers about there are exactly like you-know-who.  They've never been presented with Chase's rule book which states what we all here understand.  In fact, pretty much all Chase has told them when they apply for the card is the opposite of good credit behavior.

It just seems there is not a level playing field and that creditors are sometimes directly responsibly for the mess people get in.

Something just doesn't seem right with having to push a creditor for CLIs to, say, \$25k just so we can play the UTIL game.  I'm guilty.  I've played that game.  I've got CLs equal to 3x gross income.  And all because creditors and FICO force us to play the UTIL game.  So how does that help a creditor if I max everything out and walk away?

But if that's the way the system has to work, great.  Maybe it should be like getting your first driver license: mandatory training and a credit road test prior to getting any credit.

I bet 90% of the credit population are you-know-whos.  Not a pretty picture.

Message 8 of 17
Regular Contributor

## Re: Stupid Question #1

maiden_girl wrote:

I agree with the others. I saw my FICO score drop significantly when I reported a balance on 5 credit cards....at the same time! LOL. I'm able to pay it back...I just wanted to show usage but I didn't realize the affect it would have on my FICO until...well after the fact.

I say that if you do rack up a balance on a card with a 10k limit...have lots of available credit to keep your UTL low. Also pay more than the min so you don't freak the credit card company out thinking you won't pay them back.

Why should the credit card company freak out if I am using exactly what they said I can use and paying back exactly what their agreement said I can pay?

Dont get me wrong.  I agree with what you have written.  It's just that the vast majority of credit card users are not as sophisticated as we are.  Credit card company's should be the prime educators, but they are not.  At all.

Message 9 of 17
Valued Contributor

## Re: Stupid Question #1

McArthur wrote:

We are thinking of the same poster.

I agree with you and I also agree with improvingmycredit.  We, however, are sophisticated consumers.  I'd bet that the vast majority of credit consumers about there are exactly like you-know-who.  They've never been presented with Chase's rule book which states what we all here understand.  In fact, pretty much all Chase has told them when they apply for the card is the opposite of good credit behavior.

It just seems there is not a level playing field and that creditors are sometimes directly responsibly for the mess people get in.

Something just doesn't seem right with having to push a creditor for CLIs to, say, \$25k just so we can play the UTIL game.  I'm guilty.  I've played that game.  I've got CLs equal to 3x gross income.  And all because creditors and FICO force us to play the UTIL game.  So how does that help a creditor if I max everything out and walk away?

But if that's the way the system has to work, great.  Maybe it should be like getting your first driver license: mandatory training and a credit road test prior to getting any credit.

I bet 90% of the credit population are you-know-whos.  Not a pretty picture.

i agree with you completely.

back in school they taught us algebra and geometry but not to balance a check book or handling finances.

As for playing the fico util game really how many people know that? unless looking to improve your credit i never would have found this site.

before i became a normal poster on here, i had no idea that leaving a 0% balance on my best buy card was hurting me so much. (2000/3000) out of total cl.

i paid it off and my score skyrocketed 60 points.

as for large balances when you have credit cards and you get a mortgage cc companies dont just close out your cards or cld them.

 Current: Discover Fico 709 3/15 Walmart Fico 743 4/15Inquiries (24 Months): EQ 6 TU 1 EX 6 | Most Recent: 4/09/2015Over 12 Months:9 2015 Goals:Lower UtilityEarn Cash Back Amex Zync(Unicorn) Chase Freedom\$1500Discover IT\$7,400Citi DC \$10,000Citizens Mastercard\$7,000
Message 10 of 17