Why do you need high limits if you don't use it?

[Imhotrodcrazy]

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@Anonymous wrote:

I'm new to the credit game. My goal is to have 100k to my name eventually. why? because, why not? I'll never spend anywhere near that amount, but it will make me feel good knowing that amount has been granted to me.

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I want to crack that 100k nut myself.  I am at 95.6k so I only need 3.4k to get there.  However,  I will not apply for another card to get it.  I will wait for auto cl's.  Besides,  I am trying to "equal" MVV's perfect 850 score across the board. 

[Anonymous]

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@b_diddy wrote:

Few things here:

(1) Right, if you spend (report balance) $3k/month and you have $10k CL, your utilization is about 30%.  However, with $100k CL, your utilization is 3%.  This matters to your FICO score and to underwriters.  On the other hand, too much free capacity beyond your income and ability to pay it back will be a negative for some underwriters.

(2) Risk data shows that people who can handle large amounts of credit while keeping utilization low are much less likely to default.

(3) It's fun! :-)

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Bolded part is the part I think about. My mom, the ex-loan officer, advised me to keep our available revolving credit at a maximum of less than our annual income until after we've closed on a house. 

[MidnightVoice]

Several reasons.

I have a Delta Amex for free bags on Delta Flights and Costco

I have 3 hotel cards for free nights and points when I stay there

I have a Chase United card for free bags, prioroty boarding and Club access

I have a USBank card for Overdraft protection (used 3 times, twice when our payroll screwed up and once when I screwed up - saved a ton of money)

I have a straight Amex for a security blamkey wjen I am overseas

I have a card with my wife and daughter on it that pays for Netfix and is solely so that if there is a problem anywhere, anytime they have money available for hotels and plane flights

All of these have >$10K CLIs, which I don't need, but all serve a useful function

[Anonymous]

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@Anonymous wrote:

If they will give high limits then why not? It isn't hurting you.

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That unfortunately is not true at all, at least in Canada.

If one always made credit card payments on time, or not even carried a balance on credit cards like I did, the card companies would increase the limit automatically on a regular basis.

I used to get a letter every six months or so with "Congratulations, since you're such a good customer, we have increaded your credit limit to .....

Well, in the course of a few years I ended up with a credit limit of $2000, $24000 and 25000 on threecards, one MC, two Visa, plus high limits on a few store cards.

Never thought anything of it until I applied for a Line of Credit at the bank.

They take a percentage of all your credi card limits and usethat to calculate your debt service ratio.

The fact that my credit card balance is zero and that I always pay off my monthly CC bill is irrerelevant - my total limit was $326000.- and even if one ows nothing, the banks still assume that you're maxed out at that level (since theoretically one could be) and basetheir Line of Credit decision and associated interest rate on that information.

Seems the Credit Bureaus and the banks are pulling one in opposite directions - for a good FICO score one wants a high limit with low ulilization ond asfar as the banks are concerened, they want to see a low limit to bring the Debt Service Ration down.

Don't know if things are different in the US but this sure was an eye opener for me a few weeks ago.

[gen-specific]

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@Imhotrodcrazy wrote:

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@Anonymous wrote:

I'm new to the credit game. My goal is to have 100k to my name eventually. why? because, why not? I'll never spend anywhere near that amount, but it will make me feel good knowing that amount has been granted to me.

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I want to crack that 100k nut myself.  I am at 95.6k so I only need 3.4k to get there.  However,  I will not apply for another card to get it.  I will wait for auto cl's.  Besides,  I am trying to "equal" MVV's perfect 850 score across the board. 

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You can get credit limits decreased.

Just get your 100K to say you did it

[Anonymous]

I push anywhere from 1.5 -to 4k on normal monthly spending depending on what is going on. I PIF before the statement cuts, but I am comforted by have a little breathing room on my CSP. I hope next year I can get one of my amex CL to crack 20k. Why, I PIF judiciously before the statement cuts, because I have been in situations when my mothers house was in forclosure and I was just 1k short for backed property taxes. A measly 1k short of loosing a house that she has already paid off and owns in full. Ya. I had no credit at the time to ask for a penny from anyone. So ya, I take credit pretty seriously now. I'm petrified to carry a balance, but I'm petrified to not have beefier CL.

[Anonymous]

Also, I would love NOT have the play the PIF before the statement cuts game. If I had 100k in CL, i wouldn't have to and could just set everything on autopilot. 

[RobertEG]

Higher credit limits can run the risk of a consumer assuming more debt that, if times turn tough, they may not be able to repay.

[Anonymous]

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@RobertEG wrote:

Higher credit limits can run the risk of a consumer assuming more debt that, if times turn tough, they may not be able to repay.

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True. But higher credit limits are generally given to people who have a history of paying back promtply and managing credit responsibly. CCC SP monthly to check on their customers. If something is fishy they can chase down the credit limit, freeze the account or just close it.