Voluntarily Reducing Credit Card Limits?

[Anonymous]

Hi All,

This is my first post, and I have a question I really need help with. I have several credit cards of my own and one I hold jointly with my husband. We always pay our cards off in full and on time, and over the years our credit card limits have gotten quite high.

In the next few years, we will be selling our home and buying a condo. Before we initiate this process, I would like our credit rating to be as high as possible. I am under the impression that simply having the ability to run up a substantial amount of debt---even if you have never done so---is considered a negative when applying for a mortgage.

So my question is this: Should I contact our credit card companies and ask them to reduce the limits on our cards? If I ask them to do this, will our credit rating be affected negatively (because the companies may assume we are in financial difficulty or expecting to be so)? Finally, if our rating is negatively affected, how long will it last? Is this a step worth taking, or should I let well enough alone?

Thanks to anyone who knows the answer to my question.

Fleur

[Anonymous]

Lowering limits is not considered good. The more you have and the less you use shows that you don't need it and can control from using it. Higher limits show more responsibility.

I would wait and apply and see what the lenders say before you do this. The higher limits can help keep your score higher. Lowering them can actually lower your score because they change UTL percentages.

[Anonymous]

I am going to agree with pizza.

Leave it be. When you go to get a mortgage if they are uncomfortable with the high limits they'll let you know.

[Anonymous]

It's really relative to your income and such. If you have the income to support higher CLs, then lenders will not see it as a negative. But if you only make $36K/yr and have $150K in CCs, then naturally you'll be seen as a risk.

It's all dependent on your individual situation. You can always go to your CU and ask for a sit-down with a mortgage lender. Bring your reports & have them analyze them for you. I did this about four months ago, and it was incredibly helpful. Helped us focus on what areas should get the most attention, and what areas we were worrying about without really needing to.

[haulingthescoreup]

Hi, Fleur, welcome to the forums!

It's important to remember that some things matter for FICO scores, and other things matter to lenders. So if you want to go into the lending process with optimum scores, leave your CL's where they are. At that point, if they're twitchy about your limits, you can drop them then.

What many people do in this situation is let their card companies know that they need to temporarily drop the limits. Once the mortgage funds and is a done deal, they let their CCC's know, and their limits are restored.