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Regular Contributor
KevKaos
Posts: 137
Registered: ‎04-20-2007

To much credit a bad thing?

Before I started pulling my credit reports and working to clean them up I was living "in the dark".  I had always heard that having two much credit was a bad thing. With that in mind, I called Walmart and Circuit City, and told them to lower my available credit. In both cases, the reps on the phone sounded like they thought I was crazy. Looking back, maybe I was. My GF said that I should not have and never should lower my available credit or close old cards.  While reviewing my TrueCredit report, there was a section that make suggestions for how to improve your credit score.  It said;
 
"Having too much available credit can sometimes harm your credit score. Lenders may feel that you have the ability to spend more than you could potentially pay back. You might want to consider closing a few accounts or asking to have your credit limits reduced. Avoid closing too many accounts - especially the oldest accounts on your credit report - because it could harm your credit score. Closing the oldest accounts can damage your score by making the length of your credit use appear shorter."
 
I think maybe this is one of those grey areas where there is no black or white answers, but I would be interested in hearing your thoughts on the topic. 
Moderator Emeritus
fused
Posts: 16,243
Registered: ‎03-12-2007

Re: To much credit a bad thing?

 


KevKaos wrote:
Before I started pulling my credit reports and working to clean them up I was living "in the dark".  I had always heard that having two much credit was a bad thing. With that in mind, I called Walmart and Circuit City, and told them to lower my available credit. In both cases, the reps on the phone sounded like they thought I was crazy. Looking back, maybe I was. My GF said that I should not have and never should lower my available credit or close old cards.  While reviewing my TrueCredit report, there was a section that make suggestions for how to improve your credit score.  It said;
 
"Having too much available credit can sometimes harm your credit score. Lenders may feel that you have the ability to spend more than you could potentially pay back. You might want to consider closing a few accounts or asking to have your credit limits reduced. Avoid closing too many accounts - especially the oldest accounts on your credit report - because it could harm your credit score. Closing the oldest accounts can damage your score by making the length of your credit use appear shorter."
 
I think maybe this is one of those grey areas where there is no black or white answers, but I would be interested in hearing your thoughts on the topic. 


First of all, disregard any and all comments at TC, it's all rubbish! The only time too much available credit became an issue was when I applied for a mortgage. Some perspective lenders had ants in their pants and said I needed to close some CCs for approval even though my util was low and I have no late payments on any of my CRs. They feared if I hit hard times I would max-out my CCs and have no means to pay my mortgage. 
 
Closing CCs is not going to hurt your scores so long as your util% is unchanged and there are no derogs reporting on this account (i.e. lates). Closed and open accounts are weighed and scored equally. Also closed accounts age the same as open ones with repsect to credit length history and avergae account age.
 
TC is misinforming everyone on FICO scoring. Maybe TC/TU scoring model is entirely different than FICO's. Who knows!!
Established Member
phillippbo
Posts: 26
Registered: ‎06-22-2007

Re: To much credit a bad thing?

From what I understand, and I'm sure I'll be corrected if I'm wrong, as far as your FICO score goes, since your income is not factored in at all (and the system would have no reliable way to know what that was anyway), how much credit you have available only hurts you if you have used too much of it already.  In other words, if you have $1,000,000 in available credit, but only used $1,000 of it, you'd be golden.  On the other hand, if you used $999,999.99 of that credit, it'd ding you something awful.  If what you're talking about is the scoring, in other words, the more credit you have available the better, regardless of the dollar amounts involved.
 
Now, lenders themselves run by a different set of rules.  Some more conservative (and "old school") lenders would likely get a little jittery if you have that $1,000,000 worth of credit available but only make $13K a year, but other banks would be happy to see that you haven't defaulted, and hope *they're* the bank you go all crazy with so they can get rich off the fees (especially if the decision process is automated).
 
At the end of the day, it varies from lender to lender, and there's really no broad-sweeping rule that encompasses them all.
Moderator Emeritus
fused
Posts: 16,243
Registered: ‎03-12-2007

Re: To much credit a bad thing?



phillippbo wrote:
From what I understand, and I'm sure I'll be corrected if I'm wrong, as far as your FICO score goes, since your income is not factored in at all (and the system would have no reliable way to know what that was anyway), how much credit you have available only hurts you if you have used too much of it already.  In other words, if you have $1,000,000 in available credit, but only used $1,000 of it, you'd be golden.  On the other hand, if you used $999,999.99 of that credit, it'd ding you something awful.  If what you're talking about is the scoring, in other words, the more credit you have available the better, regardless of the dollar amounts involved.
 
Now, lenders themselves run by a different set of rules.  Some more conservative (and "old school") lenders would likely get a little jittery if you have that $1,000,000 worth of credit available but only make $13K a year, but other banks would be happy to see that you haven't defaulted, and hope *they're* the bank you go all crazy with so they can get rich off the fees (especially if the decision process is automated).
 
At the end of the day, it varies from lender to lender, and there's really no broad-sweeping rule that encompasses them all.


I just won't do business with a lender who places such demands!
Established Contributor
trinigal
Posts: 578
Registered: ‎06-18-2007

Re: To much credit a bad thing?

I'd have to agree with Mr. Hawaii:smileyvery-happy:, it could hurt you on manual review.  It does not affect your score unless you're also carrying high util.
 
That being said though, Flygirl just posted an article on Financial Reviews and the decreasing of CC limits and although they claim, too much available credit is not a factor for reducing CL, you just never know.
Regular Contributor
KevKaos
Posts: 137
Registered: ‎04-20-2007

Re: To much credit a bad thing?

[ Edited ]


trinigal wrote:
I'd have to agree with Mr. Hawaii:smileyvery-happy:, it could hurt you on manual review.  It does not affect your score unless you're also carrying high util.
 
That being said though, Flygirl just posted an article on Financial Reviews and the decreasing of CC limits and although they claim, too much available credit is not a factor for reducing CL, you just never know.


You all have raised very good points. I have to recheck my numbers, but I do believe that I am under 10% util overall even if one account may have a slightly higher util than the others. Now-a-days, since I have some cards with differing CL's and decent rates, if I do carry a balance, I try to pay down the one with the higher util first so that I can stay near or under the 10%. Of course I hope to be debt free by Nov of this year when my car is paid off.  Someday I may get to the point where I PIF every month.
 

Message Edited by KevKaos on 07-26-2007 12:31 PM

Message Edited by KevKaos on 07-26-2007 12:32 PM

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