Is it possible to have too much credit when applying for a loan (even with great FICO scores)?

[Anonymous]

I'm currently in the process of applying for a HELOC, and was recently denied by a credit union.

My mortgage FICO scores seem to be in the right range:  EX98 - 785, TU04 - 756, EQ04 - 804, but I was automatically denied by one of the credit unions I applied for (dcu.org) with no reasons provided.   The amount I applied for was around 100K (based on available equity in my home).   I have a revolving credit limit of 150K (<1% utilized), a primary mortgage (~600K loan over 900K est value), and an auto loan (<10K remaining).  

I am wondering if I was denied due to a high CC limit (even though it's under-utilized).  Has anyone ever been in a similar situation and saw a benefit by _decreasing_ their credit card limit, in order to "make room" for another loan?

[Anonymous]

Do you know what your DTI is? We just built a new house in August and an underwriter for our mortgage company was uncomfortable with the total available credit I had (About $320K at the time). My utilization across the board was less than 2%, but they still asked me to reduce my exposure by $100K.

[Anonymous]

I see, that's really helpful to know.  Assuming I max out my credit, then my DTI would be somewhere in the mid 40%.  Did your underwriter require you to reduce the exposure, then re-request a credit score to confirm?  Just curious how that process worked out for you.

Thanks!

[Anonymous]

Once I closed the accounts, my Loan Officer and I had to Conference Call in with a third-party organization, hired by the mortgage company, that verifies the account status with the creditors and then they immediately update your credit report (or so they say). The only questions they asked my creditors were, "What is the account balance?" (They were all paid off), "What is the status of the account?", and "Were the last six payments on time?" Once that was done I was golden. So, I suppose to answer your question, certain lenders do care about your overall exposure, even if the credit is barely utilized, which was my case. I hope this helps.

[takeshi74]

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@Anonymous wrote:

Is it possible to have too much credit when applying for a loan (even with great FICO scores)?

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Yes.  "Great FICO scores" do not mean that one will be extended infinite credit.  There is a limit to what a given creditor will extend to a given credit profile.  That limit will vary from creditor to creditor and we can't tell you what that would be for any creditor.  Unfortunately, you won't find out until you bump into it but you can address it if it happens and if you want to comply with that creditor.  Keep it mind that it is never just about score.

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@Anonymous wrote:

My mortgage FICO scores seem to be in the right range:  EX98 - 785, TU04 - 756, EQ04 - 804, but I was automatically denied by one of the credit unions I applied for (dcu.org) with no reasons provided.

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You should be provided reasons.  When was the denial?  The letter with score(s) and reason(s) may still be on its way to you.

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@Anonymous wrote:

I am wondering if I was denied due to a high CC limit (even though it's under-utilized).  Has anyone ever been in a similar situation and saw a benefit by _decreasing_ their credit card limit, in order to "make room" for another loan?

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No telling why you were denied.  Again the creditor should provide the reasons.   You cannot rely on anecdotal evidence from others to determine why your were denied.  There are certainly those who had too much credit extended to them but that doesn't necessarily mean that is the case for you.  If you don't get the letter then contact you creditor to determine why you were denied.

[Thomas_Thumb]

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@Anonymous wrote:

I'm currently in the process of applying for a HELOC, and was recently denied by a credit union.

My mortgage FICO scores seem to be in the right range:  EX98 - 785, TU04 - 756, EQ04 - 804, but I was automatically denied by one of the credit unions I applied for (dcu.org) with no reasons provided.   The amount I applied for was around 100K (based on available equity in my home).   I have a revolving credit limit of 150K (<1% utilized), a primary mortgage (~600K loan over 900K est value), and an auto loan (<10K remaining).  

I am wondering if I was denied due to a high CC limit (even though it's under-utilized).  Has anyone ever been in a similar situation and saw a benefit by _decreasing_ their credit card limit, in order to "make room" for another loan?

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I suspect they were nervious about your DTI, thus the decline. Regardless of score, perceived ability to pay bills comes into play. Typical metric is DTI.

DTI does not relate to credit lines. It's payment obligations in aggregate which includes monthly installment loans, minimum monthly cc payments and other monthly obligations relative to stated income. Your CC limit unlikely to be a deciding factor itself.