topic Re: Why is "too much" credit "bad"? in Credit Cards

Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:46:26 GMT

I would like to hear your guys's opinions

For example, I personally have over 100k in credit but I don't see anything that can go wrong as long as you have firm and solid self control. I don't buy anything I don't need or can't afford. I will never, in my life, put a balance that I cannot pay down, because if I am at that point, I would be using my emergency funds.

I want to hear what you guys think!

Edit: I mean for us, as consumers/individuals, rather than the lender's point of view.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:44:40 GMT

An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying. You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:47:09 GMT

@Anonymous wrote:
An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying. You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though .

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:47:41 GMT

Also not everyone has the luxury of having an emergency fund. For them their credit cards are their emergency funds. Or even if you have an emergency fund something beyond what you financially expect comes up like a medical emergency, lay off, theft, family issues, etc.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:48:44 GMT

@Anonymous wrote:
An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying. You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

Read that also. Very interesting. It explains a lot of what has been happening. You need to go on app sprees in sprints. Not too many at one time and let them age. I haven't put much on most of my cards right now because we're trying to finish our home. So just some larger charges for it on prime's only.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:49:16 GMT

@Anonymous wrote:
Also not everyone has the luxury of having an emergency fund. For them their credit cards are their emergency funds. Or even if you have an emergency fund something beyond what you financially expect comes up like a medical emergency, lay off, theft, family issues, etc.

Right, but let's say someone has a vast amount of liquid assets to cover all of that.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:49:33 GMT

@Anonymous wrote:
Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though .

The bad side for us is that some lenders do not like individuals with lots of credit. For example, Penfed has the term "pyramiding credit" that they use as a denial reason.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:51:51 GMT

@Anonymous wrote:
@Anonymous wrote:
Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though .
The bad side for us is that some lenders do not like individuals with lots of credit. For example, Penfed has the term "pyramiding credit" that they use as a denial reason.

Wow, I have never heard that. It's the same as "too much available credit" right?

Edit: I have heard of people being denied for "too much available credit" but I would say that is because their income/application profile doesn't support it. That's why we know our highest exposure from lenders.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:53:59 GMT

@Anonymous wrote:
Right, but let's say someone has a vast amount of liquid assets to cover all of that.

Not many credit card lenders (if any) ask for a personal balance sheet. For personal loan or mortgage they'll probably go deeper and ask for that. But I've never a credit application with fields for assets/liabilities/networth. Well now that I think about it, in the past I may have had to select a pull down asking what was your liquid asset value range.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 07:55:24 GMT

@Anonymous wrote:
@Anonymous wrote:
Right, but let's say someone has a vast amount of liquid assets to cover all of that.
Not many credit card lenders (if any) ask for a personal balance sheet. For personal loan or mortgage they'll probably go deeper and ask for that. But I've never a credit application with fields for assets/liabilities/networth. Well now that I think about it, in the past I may have had to select a pull down asking what was your liquid asset value range.

Mhmm that is what I was referring to. Just filled out a BOA app and it asked for that. I believe Citi asks for that too....(I forgot in a couple minutes, barely got approved for citi dc lol)

Re: Why is "too much" credit "bad"?

UncleB — Wed, 20 Jul 2016 08:23:01 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though .
The bad side for us is that some lenders do not like individuals with lots of credit. For example, Penfed has the term "pyramiding credit" that they use as a denial reason.
Wow, I have never heard that. It's the same as "too much available credit" right?

Edit: I have heard of people being denied for "too much available credit" but I would say that is because their income/application profile doesn't support it. That's why we know our highest exposure from lenders.

If you see people joking about being an 'Egyptian' this is what they are talking about... it's a play on being told (usually by a credit union) that they are "Pyramiding debt".

In any case (by any name) my own fear is that if I apply for anything and everything, something will come along that I really want but I'll be declined because either I've already got enough credit, or have too much.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 11:18:25 GMT

@Anonymous wrote:
An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying. You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

Great read, thanks for the link, i don't have comenity cards, well I just pulled a paypal credit but otherwise none so I hadn't been perusing the comnetiy specific threads and would have totally missed this

Re: Why is "too much" credit "bad"?

kdm31091 — Wed, 20 Jul 2016 11:22:19 GMT

Lenders can view an excessive amount of credit vs income as, well, excessive. If you have a 20k income, having 500k in limits may make it appear that you'll charge up a bunch of money and clearly not be able to repay. Assets can change this somewhat, but you don't want to get in a habit of overspending and using your savings to pay the debt.

Re: Why is "too much" credit "bad"?

irunfromcredit — Wed, 20 Jul 2016 11:26:59 GMT

@Anonymous wrote:
I would like to hear your guys's opinions

For example, I personally have over 100k in credit but I don't see anything that can go wrong as long as you have firm and solid self control. I don't buy anything I don't need or can't afford. I will never, in my life, put a balance that I cannot pay down, because if I am at that point, I would be using my emergency funds.

I want to hear what you guys think!

Edit: I mean for us, as consumers/individuals, rather than the lender's point of view.

From a consumer's point of view, I would imagine it would be very bad if one can't practice self control financially. Too much credit can open doors to serious debt to someone who is not fiscally responsible.

From a lender's point view, now that's a whole other can of worms, but that's not what you're asking....

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 11:29:47 GMT

@Anonymous wrote:
I would like to hear your guys's opinions

For example, I personally have over 100k in credit but I don't see anything that can go wrong as long as you have firm and solid self control. I don't buy anything I don't need or can't afford. I will never, in my life, put a balance that I cannot pay down, because if I am at that point, I would be using my emergency funds.

I want to hear what you guys think!

Edit: I mean for us, as consumers/individuals, rather than the lender's point of view.

Mongolot, don't take this wrong or as an insult, but you're very young and you can never tell what life will bring that could cause you to use credit in a manner that you don't think that you would. Most people that have got in over their heads with credit and/or filed bankruptcy never intended to be in that situation. Marriage, children, divorces, ill health and a myriad of other issues can lead people to use credit when they have no other alternative. It's best to not put yourself in a position where you have so much credit that using 10% might not seem like much because it's low utilization but in reality represents a lot of money.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 11:31:59 GMT

@Anonymous wrote:
@Anonymous wrote:
Also not everyone has the luxury of having an emergency fund. For them their credit cards are their emergency funds. Or even if you have an emergency fund something beyond what you financially expect comes up like a medical emergency, lay off, theft, family issues, etc.
Right, but let's say someone has a vast amount of liquid assets to cover all of that.

Very few people are in that position. Medical issues can cost hundreds of thousands of dollars or more. Unless you are independently wealthy don't assume that you will always have enough liquid assets to cover these types of issues.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 11:47:18 GMT

I know that when you apply for a mortgage with many lenders, they will consider the minimum payment for the full credit line on all of your credit accounts (regardless of whether they are reporting a balance or not) as debt outstanding

Re: Why is "too much" credit "bad"?

galahad15 — Wed, 20 Jul 2016 12:05:50 GMT

@Anonymous wrote:
I know that when you apply for a mortgage with many lenders, they will consider the minimum payment for the full credit line on all of your credit accounts (regardless of whether they are reporting a balance or not) as debt outstanding

Very interesting, thanks for sharing the helpful tip...I guess maybe that is the reason why whenever I have tried to obtain or refinance a mortgage in the past, the mortgage lenders almost always without exception asked or encouraged me to close multiple cards first.

Re: Why is "too much" credit "bad"?

Anonymous — Wed, 20 Jul 2016 12:12:04 GMT

@galahad15 wrote:
@Anonymous wrote:
I know that when you apply for a mortgage with many lenders, they will consider the minimum payment for the full credit line on all of your credit accounts (regardless of whether they are reporting a balance or not) as debt outstanding
Very interesting, thanks for sharing the helpful tip...I guess maybe that is the reason why whenever I have tried to obtain or refinance a mortgage in the past, the mortgage lenders almost always without exception asked or encouraged me to close multiple cards first.

My dad is involved in mortgage lending. It may not be the case with all lenders, but certainly with the more conservative ones

Re: Why is "too much" credit "bad"?

redpat — Wed, 20 Jul 2016 12:55:21 GMT

@Anonymous wrote:
@Anonymous wrote:
I would like to hear your guys's opinions

For example, I personally have over 100k in credit but I don't see anything that can go wrong as long as you have firm and solid self control. I don't buy anything I don't need or can't afford. I will never, in my life, put a balance that I cannot pay down, because if I am at that point, I would be using my emergency funds.

I want to hear what you guys think!

Edit: I mean for us, as consumers/individuals, rather than the lender's point of view.
Mongolot, don't take this wrong or as an insult, but you're very young and you can never tell what life will bring that could cause you to use credit in a manner that you don't think that you would. Most people that have got in over their heads with credit and/or filed bankruptcy never intended to be in that situation. Marriage, children, divorces, ill health and a myriad of other issues can lead people to use credit when they have no other alternative. It's best to not put yourself in a position where you have so much credit that using 10% might not seem like much because it's low utilization but in reality represents a lot of money.

^+1.

Then why would you need a 100k in overall credit when you can't afford it anyway. You might consider consolidating/closing some cards now and use cards that give you the best rewards for your spend. While some cards are just kept for Travel Perks, I don't think there is a need for more than 3-4 cards.

Utilitzation padding is over kill IMO on these forums.

Down the road there maybe a card you really want, but could be denied because of too much open credit.