@Katrina wrote:
I have seen quite a bit of talk about open credit, the more credit avai the better, and discussions about utilization. None of which answers my question - How much revolving credit is ideal?
That's because there is no clear cut answer that universally applies to everyone. That's for each to determine.
For any given credit profile different creditors will be willing to extend different amounts so you can't even use what creditors will extend as a basis. You would have a very difficult time finding that info anyway as it is not freely disclosed.
If house shopping the mortgage lender will indicate if available credit is a concern. If not, I don't recommend fretting over it. Even if it is brougt up one can close out accounts (do not close any with a balance!) if desired or go find another mortgage lender that may not be concerned, etc.
@Katrina wrote:
Her and her fiance are wanting to buy a house next year - wich may be hard with the amount of debt she is carrying.
Amount of debt is a potential concern but don't conflate available credit and debt. They're two entirely different things. If a person has a tendency to run up credit card debt and finds that lower limits help to manage that spending then it may make sense for that person to have lower limits. However, revolving utilization is a common topic because it is a signfiicant scoring and risk factor so definitely keep that in mind. General advice is do not exceed 30% but optimal is much lower. One can always pay prior to report date on revolving accounts to reduce the reported balances and revolving utilization. Your daughter could use this approach in the monthe leading up to her home purchase to eke out additional points if that would help.
@Katrina wrote:
What is the recommended (rule of thumb) amount of available credit to have to maintain a household budget?
Again, no universal answer. Additionally, budget and avaialble credit are two entirely different things. One needs to have a budget and stick to it regardless of amount of available credit. If your daughter's budget is based on available credit then she needs to work on her budget and separating it out from avaialble credit. Credit can certainly be used for purchases but it should have nothing to do with budget.
@Katrina wrote:
After looking at her over all picture and her spending habits, my advise to her would be close out the high interest cards and only keep the amount of credit she can pay off in a year at best. Of course, best case scenario would be not to carry balances at all - but we are talking kids here (early 20's) so I know that is a hard one.
If she has high revolving utilization she will need to get it down. What she can pay off in a year won't really help score-wise though it might help her from drowining in even deeper water. Revolving utilization is easy to calculate. It's simply balance(s)/limit(s). A $100 balance on a $1,000 limit is 10%, for example. Both overall revolving utilization and individual for each account matter.
Both you and your daughter will want to read up. If she has derogs then she will want to look into whether or not she can address them before house shopping. Again, she will want to get her revoling utilization down. Her credit and her fiance's credit not only determine the approval but the terms (e.g. rates) that they will qualify for. On a big ticket item like a home even a small % matters.
