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"Too much available credit"?...Just didn't sound right...

Established Contributor

"Too much available credit"?...Just didn't sound right...

There's been some talk here lately concerning the "right" amount of available credit. "Too much available credit" just doesn't sound like a plausible reason for denial to me and here is an excerpt of an article about credit myths which seems to agree.

 

Having too much available credit on credit cards can hurt your score. Some people even think a lender “might deny your credit application if they think you have ‘too much’ credit available — high credit limits, many credit cards, or a combination — with the rationale being that if a consumer were to use all of that available credit, she may not be able to make the payments on the loan/card being applied for,” says Paperno. This was true before the era of credit scoring, but not today. “There is nothing in the scoring formulas that penalize a consumer for having too much available credit,” he says. If anything, it might prove your credit worthiness, as more available credit and lower balances tend to signify better behavior.

 

The entire article is here: http://finance.yahoo.com/news/5-credit-myths-ditch-2013-110058467.html

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Message 1 of 22
21 REPLIES
Senior Contributor

Re: "Too much available credit"?...Just didn't sound right...

This is what I try to explain to people! As a 23 year with avail credit in excess of my income, I still get clis and approvals. I limit util though obvi! Keep your stats in check, and you'll have no probs! Kudos for posting this!:-)
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Message 2 of 22
Valued Contributor

Re: "Too much available credit"?...Just didn't sound right...


youngandcreditwrthy wrote:
This is what I try to explain to people! As a 23 year with avail credit in excess of my income, I still get clis and approvals. I limit util though obvi! Keep your stats in check, and you'll have no probs! Kudos for posting this!:-)

You are the exception from what I have seen, you have done a great job and I don't think most people are near as educated or as peristant as yourself! kudos to you

 

Also I think the biggest reason for being declined for too much credit is not with applying for more credit cards but applying for a mortgage, working in real estate it is a pretty common occurance for someone buying a home to be asked to close credit cards with high climts as a criteria for approval if the house is approaching the higer end of price vs income.

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Message 3 of 22
Frequent Contributor

Re: "Too much available credit"?...Just didn't sound right...

While there may not be a scoring model based upon too much credit, nothing can keep the lenders from denying if they feel you have too much credit already...


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Message 4 of 22
Valued Contributor

Re: "Too much available credit"?...Just didn't sound right...


ryanbush wrote:

youngandcreditwrthy wrote:
This is what I try to explain to people! As a 23 year with avail credit in excess of my income, I still get clis and approvals. I limit util though obvi! Keep your stats in check, and you'll have no probs! Kudos for posting this!:-)

You are the exception from what I have seen, you have done a great job and I don't think most people are near as educated or as peristant as yourself! kudos to you

 

Also I think the biggest reason for being declined for too much credit is not with applying for more credit cards but applying for a mortgage, working in real estate it is a pretty common occurance for someone buying a home to be asked to close credit cards with high climts as a criteria for approval if the house is approaching the higer end of price vs income.


True Dat, at least with a goodly number of Mortgage underwriters.  I've had Mortgage companies ask me to close accounts after getting a zero balance on all cards, but I've also had Mortgage companies (and my own credit union) say, keep the accounts open, just keep your utility low and zero out your balances...something that's talked about on here all the time ! 

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Message 5 of 22
Valued Contributor

Re: "Too much available credit"?...Just didn't sound right...

There are many lenders who will tell yu that you have enough credit available for your income. As income goes up and credit goes up, available credit is not as big a deal. Someone with a short history and only 20000 income will hear that sooner than someone with twenty years of history and 200000 income.

 

I have more credit than claimed income and have not run into any problems, yet.Hopefully I do not, but it is always possible.

Message 6 of 22
Established Contributor

Re: "Too much available credit"?...Just didn't sound right...


E150GT wrote:

While there may not be a scoring model based upon too much credit, nothing can keep the lenders from denying if they feel you have too much credit already...


+1  



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Message 7 of 22
Valued Contributor

Re: "Too much available credit"?...Just didn't sound right...

Total credit is more than income and i keep getting cli
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Message 8 of 22
Valued Contributor

Re: "Too much available credit"?...Just didn't sound right...

also there was another poster on here today saying she was declined for a chase freedom with a 750 score becasue of her other obligations, sort of falls in with this scenario

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Message 9 of 22
Valued Contributor

Re: "Too much available credit"?...Just didn't sound right...


adavis425 wrote:

There's been some talk here lately concerning the "right" amount of available credit. "Too much available credit" just doesn't sound like a plausible reason for denial to me and here is an excerpt of an article about credit myths which seems to agree.

 

Having too much available credit on credit cards can hurt your score. Some people even think a lender “might deny your credit application if they think you have ‘too much’ credit available — high credit limits, many credit cards, or a combination — with the rationale being that if a consumer were to use all of that available credit, she may not be able to make the payments on the loan/card being applied for,” says Paperno. This was true before the era of credit scoring, but not today. “There is nothing in the scoring formulas that penalize a consumer for having too much available credit,” he says. If anything, it might prove your credit worthiness, as more available credit and lower balances tend to signify better behavior.

 

The entire article is here: http://finance.yahoo.com/news/5-credit-myths-ditch-2013-110058467.html


Also, by the same Paperno with a slight nuance: http://www.bankrate.com/finance/credit-cards/closing-credit-card-dings-credit-score-1.aspx

 

 

It's just not true that you can have too much available credit. That by itself is never a negative with the score. Sometimes the things you do to get too much can be a problem, such as opening a bunch of new accounts, but for the most part, that's just kind of an old wives' tale.

 
Message 10 of 22