Credit Cards

[Anonymous]

I recently called my credit card companies to lower my credit limits.  I don't need the high limits they have given me and I pay off my cards monthly.  I want to keep my credit pristine, as it has always been, even through a job loss.  I am fortunate that I never racked up alot of debt as many have done.  Now is the time to cut back on things that aren't important and continue to save at least 10% of your monthly income.

[Anonymous]

Even though you pay in full- you may have damaged your FICO score-

[Anonymous]

Timothy,
I disagree with you. I have actually helped my FICO score, which is already in the 800's, by lowering my limits and continuing to pay off balances monthly. I should mention that I am in the Financial Services Industry. The more credit available or outstanding on your report is what hurts your score.

[MsKiwi]

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@Anonymous wrote:
I recently called my credit card companies to lower my credit limits.  I don't need the high limits they have given me and I pay off my cards monthly.  I want to keep my credit pristine, as it has always been, even through a job loss.  I am fortunate that I never racked up alot of debt as many have done.  Now is the time to cut back on things that aren't important and continue to save at least 10% of your monthly income.

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You can kep your credit pristine without lowering your available credit. By lowering your available credit you may have hurt yourself in utilization. Even if you pif, if you don't pif before the statement hits your util may look high and that in turn can lower your fico score.

It sounds as though you manage your money well so there really is no need to lower your cl.

In the end, it is your choice...... but lowering your cl only makes sense to me if you are afraid you *can't handle the credit available to you.

[MsKiwi]

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@Anonymous wrote:

The more credit available or outstanding on your report is what hurts your score.

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I disagree with the first part but agree with the second part of your statement. Utilization is what affects your score. It's all about the percentages,

[Anonymous]

Ok, we can agree to disagree. Perhaps I should have said, as a lender and credit underwriter for 30 years, that utilization affects your score, but the amount of available credit outstanding on revolving debt affects how a lender reviews your application for credit. If you have alot of additional credit available to you, as a lender, they are going to consider a maximum payment, as if you were maxing out your revolving debt, to make sure you can afford your new loan with them. You could be denied based on having too much credit available to you on a revolving basis. Remember, a good lender takes into account, not only your FICO score, but also your ability to pay, and your character you have displayed. If I would see someone with $100,000 in revolving debt and their income is only $80,000 year, that will make me ask more questions and try to persuade them to lower their limits, if not needed. I recently applied for a credit card for my new business and they did not even ask my income (which has been cut in 1/2) and they gave me a $20,000 unsecured card, all due to my high FICO. Though I have no intention of using that limit, this was so wrong by that credit card issuer to use only my FICO to determine my ability to pay.

[BBYGRL]

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@Anonymous wrote:
Timothy,
I disagree with you. I have actually helped my FICO score, which is already in the 800's, by lowering my limits and continuing to pay off balances monthly. I should mention that I am in the Financial Services Industry. The more credit available or outstanding on your report is what hurts your score.

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I agree with Timothy. Lowering your CLs can hurt your score, especially if you carry balances that exceed 10% UTL. If you're responsible with your available credit, large CLs can't hurt. At the end of the day it can end up being a personal choice. 

[MsKiwi]

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@Anonymous wrote:
Ok, we can agree to disagree. Perhaps I should have said, as a lender and credit underwriter for 30 years, that utilization affects your score, but the amount of available credit outstanding on revolving debt affects how a lender reviews your application for credit. If you have alot of additional credit available to you, as a lender, they are going to consider a maximum payment, as if you were maxing out your revolving debt, to make sure you can afford your new loan with them. You could be denied based on having too much credit available to you on a revolving basis. Remember, a good lender takes into account, not only your FICO score, but also your ability to pay, and your character you have displayed. If I would see someone with $100,000 in revolving debt and their income is only $80,000 year, that will make me ask more questions and try to persuade them to lower their limits, if not needed. I recently applied for a credit card for my new business and they did not even ask my income (which has been cut in 1/2) and they gave me a $20,000 unsecured card, all due to my high FICO. Though I have no intention of using that limit, this was so wrong by that credit card issuer to use only my FICO to determine my ability to pay.

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You are correct if you are applying for a home or perhaps a car in that a lender will look at your overall picture. I was talking about Fico scoring only. It's equally important that fico scores are painting a picture as to your ability to repay a debt. Someone who only has low limit cards may be able to achieve a decent fico score but I would say most card issuers are not going to hand out a large CL (ex. $20,000) to someone who has only low limit cards ($300-$500). Fico scoring should never take into consideration income. I know people who make small incomes who manage their money far better than people with large incomes and vice versa.

As for underwriters looking at the big picture, we could get into an entirely different argument on how  this credit crisis and mortgage crisis has come to  be where it is.

[Anonymous]

That's the first I've heard that in about 100,000 reads. Are you sure?

[wmarat]

I do not think that lowering or increasing CL itself has any importance FICOwise. CL is only important in terms of utilization, therefore I fail to see why should anyone purposely lower his/hers CL's. Available credit is not equal to debt, so if some lender seeing 800 FICO potential customer and is not happy with his/hers available credit, take your business to another lender.