Income and how it effects credit limits

[ngerasimatos]

I have seen some people in these forums post about how they have 60k+ available in credit.

Why would creditors extend themselves so far? Are those individuals with large amounts of credit available making ridiculous income annually? I just cannot fathom why anyone would need 60k in personal credit. Maybe if it was business credit, but personal? 

I am only asking because one of my friends is a contractor, 1099, and makes 60k annually and he was recently approved for an AMEX (i forgot what program) with a 25k limit, and he also has a AMEX Green for business as well. I think its insane they granted such a large credit line.

[Anonymous]

Part of it is income and level of spending.

But for the most part its not about needing 60k in credit, its all about utilization.  Keeping your utilization at less than 10% is very difficult with low CLs.  

[MrShush]

It's sort of like going out to the bars and hanging out with your friends and NOT CARING is when you are approached by all the women (or guys)! If you act like you don't need it, it falls in your lap! LOL

[BungalowMo]

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@Anonymous wrote:

Part of it is income and level of spending.

But for the most part its not about needing 60k in credit, its all about utilization.  Keeping your utilization at less than 10% is very difficult with low CLs.  

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That's not necessarily so. 

The huge mistake people make (myself included, years ago) is that they view credit cards as an extension of their income!  Use it up & suddenly your $600 cc balance goes to $650, they pay the $25 min, then the next mo it's $685, etc etc...then they're in a mess.  The actual limit has nothing to do with util.  A 10k limit with a 1k balance is the same as a $500 limit with a $50 balance.  Both people post a 10% util.

Either pay in full before the statement cuts, or keep the util below 10% at statement cut, & your FICO's will be happy in this respect.

[Watchmann]

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@Anonymous wrote:

Part of it is income and level of spending.

But for the most part its not about needing 60k in credit, its all about utilization.  Keeping your utilization at less than 10% is very difficult with low CLs.  

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Unfortunately that is the mindset of most people, but it is the wrong way to look at debt.  Instead of shooting for a very high CL and then spending up to 10% of that amount in order to keep total util. under 10%, people should be looking to keep debt low, PERIOD.  Keep the spending down in line with your income and forget about CL limits and utilization.  Doing that will make you much more financially solvent.

Those with long credit histories and long, blemish free relationships with credit companies can get large credit lines.  I have over $60k of credit on two AMEX cards, plus a Gold card, but since I PIF every month it really is of no consequence to me.  I had a Chase card and last year the CL was cut from $33k to $8k.  It had no effect on my FICO score since my untilization is close to nil in either case.  Focusing on keeping your overall debt reasonable and in line with your income will bring you the most rewards, financially speaking.. 

[OptimalFICO]

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@BungalowMo wrote:

The actual limit has nothing to do with util.

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I disagree and respect the point you are making, but the actual limit has everything to do with utilization - that's the formula. I charge all monthly expenses on a cash rewards card and PIF at the end of the month (the cash rewards are free money).  It's also a great way to keep track of everything you spend and manage finances (especially for tax purposes). I need a higher CL so that I don't have to worry about percent of utilization. A card with a $30K CL means I can only spend $3K if I want to keep utilization at 10%. But you're right - people can easily fall prey to the credit card game of not PIF and before their know it the balance is out of control. But there are a lot of other people who smartly use credit as a tool in their wealth toolbox.

[MarineVietVet]

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@OptimalFICO wrote:

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I disagree and respect the point you are making, but the actual limit has everything to do with utilization - that's the formula. I charge all monthly expenses on a cash rewards card and PIF at the end of the month (the cash rewards are free money).  It's also a great way to keep track of everything you spend and manage finances (especially for tax purposes). I need a higher CL so that I don't have to worry about percent of utilization. A card with a $30K CL means I can only spend $3K if I want to keep utilization at 10%. But you're right - people can easily fall prey to the credit card game of not PIF and before their know it the balance is out of control. But there are a lot of other people who smartly use credit as a tool in their wealth toolbox.

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That's not exactly correct. You can spend up to the entire CL during the month if you'd like. It's the amount shown on the monthly statement that determines utilization for that month. In your case you can spend up to $30,000 each month as long as no more than $3,000 is shown on your statement if you want that 10% utilization.

From a BK years ago to:
9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
Common Abbreviations
Frequently Requested Threads
Whats In Your FICO Score

[keikdasneak]

Was the OP question even answered??? LOL

[Anonymous]

Most of the banks will give you the limit that is 1/3-1/4 of your annual income (assuming excellent credit)

[MarineVietVet]

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@keikdasneak wrote:

Was the OP question even answered??? LOL

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You're absolutely right.   I apolpogize for the thread jacking.

From a BK years ago to:
9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
Common Abbreviations
Frequently Requested Threads
Whats In Your FICO Score