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How much credit one really needs? When to stop?

Valued Member

How much credit one really needs? When to stop?

Good day/night everyone!

 

I see that some people have tens of credit cards, total available credit is well over 50, 100 or I saw someone posted about  > 250k in available credit. It got me thinking why would you want so much? So much that you will not ever ever use? In what situations in your life you would need so much credit available? Do I miss something here? 

 

Plus given that most people here are educated in terms of credit, they most likely will never ever go on the shopping spree until they drop to spend so much credit money I'd think, no?

 

I've tried to search for topics like this, but couldn't find anything, so here is why I post this thread.




Message 1 of 17
16 REPLIES
Senior Contributor

Re: How much credit one really needs? When to stop?

Most people on this forum try to stay under the magic number of 9% total utilization reported to maximize their FICO scores.  If you have $100k in credit limits, that means you'd have to never let more than $8999 in balances report at any given time.  99 times out of 100 this wouldn't be a problem, but in the event of some crazy life event such as the loss of a family member, loss of job, major medical issue etc. someone may be forced to report balances around that amount (maybe even more) for a temporary period of time.  During that time they don't want their credit scores to tank, so the additional utilization will keep them under 9% or in the worst case somewhere in the next threshold of 9%-29% which is considered "good" but not "excellent" in terms of utilization.

 

Other people on this forum just like to push limits.  It's fun and exciting for some to go after CLIs and watch their limits grow.  There's no real harm in it as long as the cardholder is responsible and exhibits Transactor behavior, believing in a PIF philosophy outside of some crazy circumstance.

Message 2 of 17
Valued Member

Re: How much credit one really needs? When to stop?

Yeah I suppose that makes sense if there is some unexpected medical expense or loss of loved one where you can pay with CC to cover it.

 

However from what I know (correct me if I'm wrong here) noone is accepting CC to pay your rent, car (I don't have mortgage, but inclined to think you won't be able to use CC to pay that bill as well). To pay my bills, on every bank's website I had to enter my personal bank information, so CC will be no use apart from paying cell phone, electricity, internet and other small things... 

 

I kinda get that some card is good for cashback at the sushi bar, some good at the gas station and so on, but remembering all that when you have 20+ cards sounds like impossible job... 

 

I also see what you mean with utilization, that makes sense if something unfortunate happens where you can put some charges on CC(s) 




Message 3 of 17
Highlighted
Established Member

Re: How much credit one really needs? When to stop?

I pay my rent with CC. Really the only items I can't pay with CC are my installment loans.

Message 4 of 17
Community Leader
Epic Contributor

Re: How much credit one really needs? When to stop?

Credit mix is the scoring category that is most directly related to your question.

It is more the types of credit that you have than the amount.

 

Years of anecdotal postings by others indicates that a good mix of credit is at least three revolving accounts, with at least one preferably being a major bank card, and to a lesser degree, an installment loan.  However, some achieve scores approaching 800 with no installment loans.

 

Having 10-20 revolving accounts gives more spending flexibility and can absord a given new charge amount with less effect on % util, but also requires a bunch of monitoring to avoid lates, etc.

 

 

Message 5 of 17
Community Leader
Senior Contributor

Re: How much credit one really needs? When to stop?

Plastiq can be a good option for big ticket bills like rent.  It's a nice fit for helping to meet the minimum spend requirement on a new credit card with a big signup bonus.  And if you have a 2.5% cashback card it's a push for the cost of using the service vs. the cashback.

 

Kudos to our OP for having a general skepticism about the pursuit of ever biger and bigger credit limits.  In the main you are right.  All FICO cares about is utilization -- size of credit limit is not in itself a scoring factor.

 

Thus Bob, who has four credit cards with limits of $1000 each, will have just the same score as Fred, who has four cards with limits of $20,000 each.  (This assumes of course that their utilization and other scoring factors are the same.)

 

Furthermore, Bob could spend $20,000 per month on those four small CL cards and still have a 2% reported utilization.  So the usual belief that one requires big CLs in order to have a low utilization is also unfounded.

 

Great reply by BBS by the way.  Spot on as usual.

Message 6 of 17
Regular Contributor

Re: How much credit one really needs? When to stop?

I'll echo the utilization argument. My credit lines (not AUs) total over 100k easily, which is preferable for the amount of balances I have reporting at a given time. While I bring everything down to zero if I'm looking to maximize my score, most of the time I have close to $10k reporting between the cards I use daily. I PIF every month, but I don't sweat paying prior to the statement date unless I want to report closer to 1-3% for a specific purpose.

 

As CGID outlined, it's not necessary, but instead depends on usage and payment patterns. This way makes it simple for me.

FICO as of Feb 2017:
EQ 712 | 728 TU | 713 EX
Message 7 of 17
Moderator

Re: How much credit one really needs? When to stop?


snu wrote:

I pay my rent with CC. Really the only items I can't pay with CC are my installment loans.


And if I absolutely had to I could float those with cash advances too. 

 

I've been out of work for a while previously, it happens, and may happen again though I'm not expecting it anytime soon and I can float the vast majority of my life on my credit cards if I had to.  

 

Calling it what it is, if that happened if the worst that occurs is I file BK because I can't find work to pay the escalating debts, oh well.  10 year penalty isn't the end of the world as this forum so clearly illustrates.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Message 8 of 17
Valued Contributor

Re: How much credit one really needs? When to stop?


score_is_497_hehe wrote:

Good day/night everyone!

 

I see that some people have tens of credit cards, total available credit is well over 50, 100 or I saw someone posted about  > 250k in available credit. It got me thinking why would you want so much? So much that you will not ever ever use? In what situations in your life you would need so much credit available? Do I miss something here? 

 

Plus given that most people here are educated in terms of credit, they most likely will never ever go on the shopping spree until they drop to spend so much credit money I'd think, no?

 

I've tried to search for topics like this, but couldn't find anything, so here is why I post this thread.


Other than renting a car why do you need a credit card at all?  If I need to rent a car I can put it on my company corporate charge card so for me even one is not really  necessary I can use my debit visa card for everything else like I did for six years.  

 

 I would say it is fun to get CLI.  And it is fun to have huge limits.  Most people outside of his forum probably have 1 or 2 credit cards.  I really have no need for credit cards and have gotten 13 in the last couple of months. It is addictive.  Maybe when I get to the point where I am sure I will get every card I apply for it will be less fun. 

 

You have a lot more cards than you need.  Why do you have so many?

 

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Message 9 of 17
Valued Contributor

Re: How much credit one really needs? When to stop?

Several points 1) Sometimes with the right score and income it is possible  to get a 'large" limit even if you don't  ask.  2)  The storm damage cost  at the Backwood's house now went up another $3K today for roof damage. Total cost $13K and growing.   With out large cl we would never have been able to afford these repairs much less have a reasonable % use. This is not a one month pay off.   I don't think the pool and guest house will be opening anytime soon for the season.   

Message 10 of 17