How much Credit Limit should one aim for?

[Dustink]

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@HiLine wrote:

Actually if you regard credit cards as emergency funds, it's better to keep a low total limit on a regular basis, then apply for 0% offers when the adverse event happens.

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Generally, when you need credit you can't get credit.

[HiLine]

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@Dustink wrote:

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@HiLine wrote:

Actually if you regard credit cards as emergency funds, it's better to keep a low total limit on a regular basis, then apply for 0% offers when the adverse event happens.

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Generally, when you need credit you can't get credit.

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Why? 

[Dustink]

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@HiLine wrote:

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@Dustink wrote:

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@HiLine wrote:

Actually if you regard credit cards as emergency funds, it's better to keep a low total limit on a regular basis, then apply for 0% offers when the adverse event happens.

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Generally, when you need credit you can't get credit.

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Why? 

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Look at it from the banks perspective. If somebody is borrowing money because they don't have any, how will they pay it back? That is generally reflected in higher utilization and more INQs. Also, what will you put under the income section of the application if you are unemployed?

You seek a balance transfer card after you are employed again and are demonstrating that your finances are under control again. During the unemployment, acquiring new credit it a challenge.

[HiLine]

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@Dustink wrote:

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@HiLine wrote:

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@Dustink wrote:

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@HiLine wrote:

Actually if you regard credit cards as emergency funds, it's better to keep a low total limit on a regular basis, then apply for 0% offers when the adverse event happens.

---

Generally, when you need credit you can't get credit.

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Why? 

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Look at it from the banks perspective. If somebody is borrowing money because they don't have any, how will they pay it back? That is generally reflected in higher utilization and more INQs. Also, what will you put under the income section of the application if you are unemployed?

You seek a balance transfer card after you are employed again and are demonstrating that your finances are under control again. During the unemployment, acquiring new credit it a challenge.

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Well, it is when people don't have money that they borrow. If some adverse event happens to you, how are banks supposed to know that? They are not supervising you 24/24 to find out that you are about to undergo a major surgery that may take a while to recover from. 

[Anonymous]

Dustink is right. Thats what my bankruptcy professor said on the first day of bankruptcy law in law school. It's one of the many ironies of credit. 

[bs6054]

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@Anonymous wrote:

Dustink is right. Thats what my bankruptcy professor said on the first day of bankruptcy law in law school. It's one of the many ironies of credit. 

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I think the question here is the meaning of adverse event.   Hiline is talking about large unplanned sudden costs, e.g. major operation without insurance, three major appliances blow up in the same week you crash the car etc.   Dustink is referring to job loss.

And in the job loss situation, getting 0% credit cards is hard to impossible (nearer impossible), in Hiline's case there is no difference as the banks don't know

[bs6054]

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@Dustink wrote:

10x annual income will allow you to keep utilization low even if you lose your job for a year. That is a rather unrealistic target to aim for and I am kind of joking about it, but honestly. The sky is the limit as far as total limits.

10x your average months spend is not nearly enough. Your holiday spending is likely much higher than your basic spending during the year. So your utlization will be off. It is better to have way more than you need than to have just enough.

As long as you can get it to report between 1%-9% no matter what, that is the total limit you want.

I would say a more realistic limit would be the average of 100 times you lowest months spend and 10 times your highest months spend.

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But in the "real world", outside Fico forums, MOST people do not continually need to keep utilization under 10%.  Scores really matter only when applying for credit for big ticket items such as mortgages and car loans.  (Yes, bad scores can prevent you getting the credit card you want, or the best rates on it, but that is less critical than the other cases).   So providing near those times you can get utilization and inquiries etc under control, you don't need to worry about maximum utilizations IMO.

[Anonymous]

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@bs6054 wrote:

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@Anonymous wrote:

Dustink is right. Thats what my bankruptcy professor said on the first day of bankruptcy law in law school. It's one of the many ironies of credit. 

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I think the question here is the meaning of adverse event.   Hiline is talking about large unplanned sudden costs, e.g. major operation without insurance, three major appliances blow up in the same week you crash the car etc.   Dustink is referring to job loss.

And in the job loss situation, getting 0% credit cards is hard to impossible (nearer impossible), in Hiline's case there is no difference as the banks don't know

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Good point.

[QueenofReinvention]

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@Dustink wrote:

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@HiLine wrote:

Actually if you regard credit cards as emergency funds, it's better to keep a low total limit on a regular basis, then apply for 0% offers when the adverse event happens.

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Generally, when you need credit you can't get credit.

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That is definitely true. I've read that numerous times by financial/money people. It's sort of akin to getting a job while you already have one; versus when you are unemployed. There are various theories surrounding why (some are completely ludicrous to me), but I have seen it time and time again. Anyway, it's been said to aquire loans/cc's when you DON'T need them, because when you DO need it, it will be hard to get. Even on this board, you'll see people inquiring how to get a personal unsecured loan to pay off cc bills as they blew through their savings due to an unforeseen event, and it is darn near impossible for them to get that loan. But, you will see stories where people don't really "need" the additional credit card or CLI, but they are getting it to keep their utilization down. I'm learning a lot from just reading these boards. There is stuff I wish I knew 10 years ago when I got into this cc game, because had I been more informed, I wouldn't have had to file for BK in 2010! Ah, hindsight is 20/20 vision

[Dustink]

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@bs6054 wrote:

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@Anonymous wrote:

Dustink is right. Thats what my bankruptcy professor said on the first day of bankruptcy law in law school. It's one of the many ironies of credit. 

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I think the question here is the meaning of adverse event.   Hiline is talking about large unplanned sudden costs, e.g. major operation without insurance, three major appliances blow up in the same week you crash the car etc.   Dustink is referring to job loss.

And in the job loss situation, getting 0% credit cards is hard to impossible (nearer impossible), in Hiline's case there is no difference as the banks don't know

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Large unplanned sudden costs are actually easily planned for. Job loss is a bit harder to plan for.

Proper insurance and a decent savings will protect you from sudden costs. Though, a savings account only goes so far to protect in the event of longer term unemployment. Credit only goes so far too. Simply put, there is no replacement for a consistent income.

Back to OP's post. There is no real target to aim for. Get what you are comfortable maintaining.