Credit Limits and FICO

[Anonymous]

I hear CCCs are cutting credit limit to some customer just to reduce the their (CCC's) "credit exposure" in this bad market.  I understand cutting high risk customers, but when it is done to some customers with low credit utilization, "so it won't hurt them", while doing it to others who have high credit utilization causing them to go into Universal Default situation.

On the other hand, FICO wants you to have low credit utilization, and not to use too many credit cards even with low individual utilization.  

Is this a catch-22?  

I pay all my monthly bills in full and on time, and I can easily pay off all my current (running) balances to improve my FICO (currently around 760), but I will be an easy candidate for BoA, Chase and Amex to slash my credit limits that I worked so hard on increasing for years.  One CCC customer service rep told me over the phone that "I am really not a valuable customer since I am not really paying any interest and late/overdraft fees."  How about their 3-4% commission on purchases I make every month (sometimes up to $5K on all of them), and I thought they would value my contribution. 

I think I am in the Twilight Zone...  Obviously, CCC and I have opposing interests, and for a while we had a "marriage of convenience", but I can not operate without them (hotels, rent-a-car, e-purchases, etc), and they obviously can change the Contract any time at will and I can do nothing about it.

Am I missing something?

I believe I have several options:

1. Pay off everything down to zero
2. Pay off all cards, and use only one card
3. Pay off all cards but one, and use only one card
4. Pay off all cards and keep rotating cards (keeping a different "active" card each month).
5. Keep all three balances low and keep paying monthly bills on time (as what I do today).  

Any advice how to proceed? 

[smallfry]

My understanding of the new system to be rolled out who knows when will also grant points for higher available limits. Expect a score ding if you get your limits lowered. Maybe.

[haulingthescoreup]

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GettinBetterAllTheTime wrote:

...I believe I have several options:

1. Pay off everything down to zero
2. Pay off all cards, and use only one card
3. Pay off all cards but one, and use only one card
4. Pay off all cards and keep rotating cards (keeping a different "active" card each month).
5. Keep all three balances low and keep paying monthly bills on time (as what I do today).  

Any advice how to proceed? 

---

Well, I hope you dodge the CLD bullet, but if you don't, here's how you keep from being hurt by increased util: pay your balances before the statements drop, which is when almost all cards report to the bureaus. (If you have USBank or HSBC/ Orchard bank cards, pay them off before the last business day of the month, when they report.)

If you're willing to not carry balances, this will result in no real change in your payment patterns, other than you're paying in full a week or two earlier than you might otherwise.

However, do make sure that one of the cards reports a $10-20 balance, with the others showing $0. Then don't forget to go back and pay it off.

With American Express cards, PIF before statements, because it takes two months before the next month's $0 balance will post.

With this method, you can use up to the CL of each card, and still have hardly anything report. Just make sure to stay on top of things.


edited to remove italics run amok

Message Edited by haulingthescoreup on 02-15-2009 11:52 AM

[Anonymous]

Thanks for your advice. 

I want to make sure I got you right:

1. I should use the cards as much as I want (to make the CCs happy, as they get their few % comission on business)
2. PIF (including all new purchases) a week before the due date (to ensure very low util and making FICO happy). 
3. Carry one card (rotate cards?) at very low balance (~$10-$20) and pay it off between the due date and statement date (to trigger minimal interest, thus making CCCs happy and to appear like an "active borrower" to FICO algorithm).

The question still remains what can I do to dodge CLD?