topic Re: Why do you need high limits if you don't use it? in General Credit Topics

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

Anonymous — Mon, 19 Jan 2015 02:33:32 GMT

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

Anonymous — Thu, 18 Dec 2014 09:55:50 GMT

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

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

b_diddy — Thu, 18 Dec 2014 10:43:31 GMT

@Anonymous wrote:
One of my friend asked me a question which I thought to ask here. Take me for example, I spend couple thousand dollars a month and have $30,000 credit limits on three credit cards. He was saying there is no need to apply for more credit or to request a CLI. He said if I spend $3,000 a month I don't need limits more then $10,000 because the utilization will be 30%. What do you guys say. I seen people with $100,000 + CL. What would your respond be to my friend?

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! :-)

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

Anonymous — Thu, 18 Dec 2014 12:51:56 GMT

@b_diddy wrote:
@Anonymous wrote:
One of my friend asked me a question which I thought to ask here. Take me for example, I spend couple thousand dollars a month and have $30,000 credit limits on three credit cards. He was saying there is no need to apply for more credit or to request a CLI. He said if I spend $3,000 a month I don't need limits more then $10,000 because the utilization will be 30%. What do you guys say. I seen people with $100,000 + CL. What would your respond be to my friend?
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! :-)

+1 to number 3

new addiction for me and healthier than the other ones I've had!

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

chalupaman — Thu, 18 Dec 2014 12:58:06 GMT

Utilization, being able to actually use the card and not worry about maxing it out, that sort of stuff and also it's a thrill trying to see if I can go higher with my limits. I'd definiely like to have a 10K limit card one day and technically with Chase, I have over 10K in credit from them so perhaps consolidation will be a possibility in the future.

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

Involver — Thu, 18 Dec 2014 13:27:14 GMT

You do it because you can.

It's also great for utilization purposes to maximize FICO scores if you're looking for home or auto purchases.

Mostly it's just a game though, at least to me.

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

NRB525 — Thu, 18 Dec 2014 14:01:24 GMT

OP, your friend is free to not apply for any more cards.

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

aav — Thu, 18 Dec 2014 14:09:30 GMT

@NRB525 wrote:
OP, your friend is free to not apply for any more cards.

+1 I don't feel that I have to justify my credit to anyone! What you want or need in terms of credit is your business lol. I have more credit than I i need, but I don't know what my future needs. So I like to be prepared and have a cushion for spending. My score just went up with a CLI that placed my utilization at 5%. That makes me happy!

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

uswala — Thu, 18 Dec 2014 16:11:07 GMT

@b_diddy wrote:
@Anonymous wrote:
One of my friend asked me a question which I thought to ask here. Take me for example, I spend couple thousand dollars a month and have $30,000 credit limits on three credit cards. He was saying there is no need to apply for more credit or to request a CLI. He said if I spend $3,000 a month I don't need limits more then $10,000 because the utilization will be 30%. What do you guys say. I seen people with $100,000 + CL. What would your respond be to my friend?
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! :-)

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

creditFiend — Thu, 18 Dec 2014 17:42:57 GMT

+2😉

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

Drew — Thu, 18 Dec 2014 17:45:27 GMT

I have them purely for show and tell.

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

ojefferyo — Thu, 18 Dec 2014 17:51:46 GMT

Some people like myself use them, I push a minimum of $8k/month through some cards.

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

Anonymous — Thu, 18 Dec 2014 17:59:45 GMT

We push between 3-5+k/mo through CCs. It's nice to have some breathing room.

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

Imhotrodcrazy — Thu, 18 Dec 2014 19:17:53 GMT

@Involver wrote:
You do it because you can.

It's also great for utilization purposes to maximize FICO scores if you're looking for home or auto purchases.

Mostly it's just a game though, at least to me.

I like the numbers game. I am striving for 850 across the board. Why? Why not? It's a challenge for me,,,,,,,and it keeps this old man off the streets and out of trouble.

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

Anonymous — Thu, 18 Dec 2014 21:34:04 GMT

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.

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

awp317 — Thu, 18 Dec 2014 23:39:02 GMT

THe short answer is. Why not? My long answer is everybodies situation is different. I have large limits because I actually do use them. My company has a lot of cash flow going through it each month. Some months I have over 200k on credit, that will be paid when materials are paid for by customers. But I always hated asking for money to buy materials I would rather supply the materials myself and then get paid back for them. I also do spend quite a lot on my own, DW and I are blessed to both make an excellent living. We spend quite a lot and its nice to have credit cards to reflect our spending, so that way if we want to splurge on something we dont have to put it on more than one credit card. Im paid twice a month so I can buy something today, and pay off the card with next weeks pay check. I treat the cards like short term pay check loans. But like I said everybodys situation is different.

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

Anonymous — Fri, 19 Dec 2014 04:40:47 GMT

It's great to not have to worry about utilization.

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

gen-specific — Fri, 19 Dec 2014 06:18:36 GMT

The same load I tell to underwriters

"Lower my utilization and float larger balances"

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

Anonymous — Fri, 19 Dec 2014 06:50:25 GMT

Love my credit cards. Worked hard to get good credit. As a reward to myself, I get more credit cards. Nothing wrong with that, as long as you don't let it go to your head and start spending more than you have.

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

takeshi74 — Fri, 19 Dec 2014 19:26:09 GMT

@Anonymous wrote:
Why do you need high limits if you don't use it?

Utilization. Guideline is not to exceeed 30% and to only allow one balance to report 10% or less for optimal scoring.

I don't need to fully use the sum of my credit limits but they allow me to keep my utilization at about 12% without any of the micromanagement (paying before statement date, allow time for payment process, wait for balance to report, pay remainder by due date, etc etc).

I could only have limits for the amount I spend but without micromanagement I'd have high utilization. I have had high utilization in the past and my scores suffered, approvals were less likely, limits granted were lower, APR's granted were higher and I was balance chased.

@Anonymous wrote:
What would your respond be to my friend?

Why do you need to respond to your friend? Do what works for you. Your friend can do whatever your friend wants to do. Situations and preferences vary. I recently charged a kitchen remodel and with your friend's recommended limits it would have been a hassle. Instead, I charged the entire amount on a single card with no problems. While regular spend can be a handy metric for determining desired limits to keep utilization in check people sometimes have irregular expenditures like that or vacations, etc.

While the guideline is "don't exceed 30%" that doesn't mean that one could not benefit from having lower utilization. Again, 30% is a suggested max. It is not suggested as an optimal utilization level.