How does one get stuck in Low Limit Hell

[Anonymous]

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@Anonymous wrote:
Man there's some salt in this thread lol. I have 2 cards with > $20k and multiple more > $10k. This is important to me because I plan to have a mortgage soon ( < 2 years) and it's important that lenders know that I can be responsible with that kind of money. I have over 3x my income in available credit, and I don't do anything stupid with it. When the time comes to give me $250,000- $750,000, they should be comfortable enough with my file to know I won't default on it. Just my $0.02.

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I'm not sure if you know this but having a huge total limit will ward off mortgage lenders. You become a liability to them simply for the fact that you have too much access and are MORE prone to be neck deep into debt because of what you have avaliable which is a huge risk to them. EX. You can't afford your home mortgage anymore, you lost your job and now you're relying on credit cards to live your life.

Don't take this the wrong way either. I'm not pointing fingers, I'm not saying you would default, rack up credits, etc. I'm giving you the facts. I would research this if this is something you plan on doing in > 1 year. I hope you find that home when the time comes!

Yeah, I was a bit upset but that's because my credit history is not as long or stellar as some of these older folks. I also haven't gotten into a position where I'm making above 60k because I'm still in college working for irregular internships. But you can bet your booty I'll have a few 20k cards by 2017 when I graduate. 

[UncleB]

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@Anonymous wrote:

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@Anonymous wrote:
Man there's some salt in this thread lol. I have 2 cards with > $20k and multiple more > $10k. This is important to me because I plan to have a mortgage soon ( < 2 years) and it's important that lenders know that I can be responsible with that kind of money. I have over 3x my income in available credit, and I don't do anything stupid with it. When the time comes to give me $250,000- $750,000, they should be comfortable enough with my file to know I won't default on it. Just my $0.02.

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I'm not sure if you know this but having a huge total limit will ward off mortgage lenders. You become a liability to them simply for the fact that you have too much access and are MORE prone to be neck deep into debt because of what you have avaliable which is a huge risk to them. EX. You can't afford your home mortgage anymore, you lost your job and now you're relying on credit cards to live your life.

Don't take this the wrong way either. I'm not pointing fingers, I'm not saying you would default, rack up credits, etc. I'm giving you the facts. I would research this if this is something you plan on doing in > 1 year. I hope you find that home when the time comes!

Yeah, I was a bit upset but that's because my credit history is not as long or stellar as some of these older folks. I also haven't gotten into a position where I'm making above 60k because I'm still in college working for irregular internships. But you can bet your booty I'll have a few 20k cards by 2017 when I graduate. 

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One of my 'past lives' was in real estate, and while it's true that high available credit can raise eyebrows most of the time I saw people with the opposite problem... limits that weren't high enough for their spend patterns.  More than once I saw a mortgage broker tell someone to see about getting their credit limits increased before moving forward.

I would tell anybody with a house purchase in their immediate future to work closely with an experienced morgage broker (or provider - doesn't have to be a 'broker') and let them guide you on what you need to do.  This is not a time to check with websites for advice that may or may not pertain to your situation - all profiles are different.  If you need to reduce your credit lines they will tell you, and you can do it at that time - that's an easy fix.  If you're advised to go in the other direction (get CLIs) that could be more difficult, especially if you're trying to minimize HPs as to not impact your credit scores.

A mortgage professional will be able to look at your profile and tell you what his/her lender needs to see; since they are the one who will be 'going to bat' for you it's in their interest to help you get it right.  Not to mention if they are on commission (and most are) they get paid when your loan closes.

Just my 2¢. 

[Gmood1]

I can see credit card debt affecting mortgage approvals. I believe there are members here that have mentioned their overall credit had no affect on being approved for a mortgage loan. Now if you owe 90% on your credit card's limits. That will definitely run off lenders. Lol

[redpat]

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@Anonymous wrote:
Man there's some salt in this thread lol. I have 2 cards with > $20k and multiple more > $10k. This is important to me because I plan to have a mortgage soon ( < 2 years) and it's important that lenders know that I can be responsible with that kind of money. I have over 3x my income in available credit, and I don't do anything stupid with it. When the time comes to give me $250,000- $750,000, they should be comfortable enough with my file to know I won't default on it. Just my $0.02.

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Just be aware while you go through underwriting for your mortgage they may ask you to close some of your credit cards for too much open credit.  They do look at that stuff because it's part for their risk assessment.  That is why it is better to get those limits after you get your first mortgage.

You aren't responsible for that money it's credit and borrowing that you are responsible for.  It's their money. 

[Credit_hawk]

To be fair, as Uncle B and Redpat stated, it will raise some red flags with some lenders and in some cases it may not. I think it's a bit disingenuous though to say anyone is amassing 100's of thousands in credit card limits for future mortgages. You don't need but a couple grand in limits, an established well paying job and a clean solid report to secure a million dollar mortgage.

My carpenter buddy who only has a platinum capital one card (I found out by talking about the benefits of card points for vacationing and did try to educate him on what a PC was and to do it ASAP to a QS) is a foreman in the carpenter's union making $100k a year and has been with the union for 8 years, he's 29. He just got a mortgage for a quarter million on a house but was approved for a half million. He joked about being shocked they offered that much.

Nothing wrong in just admitting you like having large limits if that's what makes you happy. With everything in life though, moderation is best. I can only speak from my personal experience of what "normal" people do cause we certainly aren't lol. I was fortunate to grow up in an upper middle-class home and my dad had an AMEX corporate and a CITI AA card. I don't remember the limit but I remember seeing a bill one time and he had a balance of $20k on the card so I'd imagine he had a large limit. My mom was a store card type. Point is, normal upper-middle class/upper class people, in my experience, don't have 20 credit cards. They have a few with healthy limits (20k+) but more than likely have a NPSL charge. Even then I'd be surprised they have more than 100k in revolving limits.

We have to keep in mind that we are not a typical representation of most Americans. We are much more educated in credit and know how to take advantage of the system for our benefit, which is great! But it's easy to get lost in our bubble and think that this is typical credit behavior but it's not. Nothing particularly wrong with that but just pointing it out. 

Everybody should do whatever makes them happy. Life is too short!

[joltdude]

Low Limit hell is at the intersection of Comenty and Sync ..... not too far from "squeaking by" on just barely making the threshold for an approval with other banks...

If you spree heavily on store cards... this is usually where you will end up.... 

The solution... get a few cards, not a handful... and time...

-J

[Anonymous]

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@Pway wrote:

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@Anonymous wrote:

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@Cheryla18 wrote:

Since i am rebuilding and at this point taking whatever i can get to re-establish my credit history....Can someone exlpain how and why someone gets stuck in low limit hell?

Just very curious

Cheryl

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Hi Cheryl.

Low limit hell happens when you open up  a lot of accounts with low starting limits (i.e. Comenity Bank SCT) and then when you apply for accounts with the potential for growth, you are given low SLs.  I have bank card accounts with limits ranging from $1500 to $5000 which is okay given my scores and income, but I could have just as easily gotten approvals with SLs of $300 and $500.  For FICO scoring purposes  you need 3 bank card accounts and 1 installment loan.  Sometimes in the course of rebuilding (and I've been just as guilty) there can be an adrenaline rush when your getting approvals and not really figuring out what accounts to target for growth because after being turned down, it feels good to be approved, even if the approval doesn't fit into your long range credit goals. 

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^^^^This, I totally agree with.  Don't over do it on the SCT.  However, my low limits cards with Comenity Bank has grown quite well over time.  They were the first to give me a store card after by bk discharge..

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Hi Pway.

I totally agree that Comenity bank provides an opportunity to re-establish credit.  I have two cards with them with limits each in excess of $17k.  I was lucky two years ago when I used SCT that they were not shutting down accounts like they are now

I ended up closing a lot of accounts because they weren't a good match.  Now, my focus is on having a strong credit profile with cards with growth potential.  My income doesn't support a $20k card, so I'm cool with that and I celebrate with our FICO family that are fortunate enough to get the big limits.  As with any situation, YMMV.

Have a great weekend.

[UncleB]

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@joltdude wrote:

Low Limit hell is at the intersection of Comenty and Sync ..... not too far from "squeaking by" on just barely making the threshold for an approval with other banks...

If you spree heavily on store cards... this is usually where you will end up.... 

The solution... get a few cards, not a handful... and time...

-J

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Amen! 

I think too many underestimate the impact of time... I've lamented before that had I found this site earlier I could have started my rebuild a few years before I actually did, but on the other hand by the time I figured out there were issuers who would lend to somebody with less-than-perfect credit my own record was only a year or so from being clean again anyway.  I guess it worked out OK. 

Because of this I skipped the SCT/Comenity cards so many people use to get back on track.  (Comenity has helped many people... I'm not knocking them at all.  They also have some good products for people even after they are reestablished.)

I think aggressive rebuilding has it's place, but when all's said and done nothing 'fixes' or builds good credit like time, and of course that's assuming you have positive history during that time.  All of us - myself included - want things 'now' but sometimes the answer is to simply wait until the time is right. 

[Credit_hawk]

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@UncleB wrote:

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@joltdude wrote:

Low Limit hell is at the intersection of Comenty and Sync ..... not too far from "squeaking by" on just barely making the threshold for an approval with other banks...

If you spree heavily on store cards... this is usually where you will end up.... 

The solution... get a few cards, not a handful... and time...

-J

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Amen! 

I think too many underestimate the impact of time... I've lamented before that had I found this site earlier I could have started my rebuild a few years before I actually did, but on the other hand by the time I figured out there were issuers who would lend to somebody with less-than-perfect credit my own record was only a year or so from being clean again anyway.  I guess it worked out OK. 

Because of this I skipped the SCT/Comenity cards so many people use to get back on track.  (Comenity has helped many people... I'm not knocking them at all.  They also have some good products for people even after they are reestablished.)

I think aggressive rebuilding has it's place, but when all's said and done nothing 'fixes' or builds good credit like time, and of course that's assuming you have positive history during that time.  All of us - myself included - want things 'now' but sometimes the answer is to simply wait until the time is right. 

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Preach!

[Anonymous]

Be patient when you're building up credit. Continuing to apply for new accounts when you're just starting out is an easy way to get stuck in low limit hell. Also be mindful of the banks you choose...AmEx and Discover are easy to grow fast with. Also avoid store cards.

This is my path: started credit history in October 2015 and I now have limits of $500 (secured), 3k, 2k, and 6k. I'm pretty happy with that.