@Anonymous wrote:
Now, I understand the whole concenpt of available credit and usage but I am having a hard time understanding what the adantage is to lots of credit cards and available credit in the hundreds of thousands?
This is a very common topic so don't overlook the countless prior threads on the matter as a resource. It's not so much a matter of the limit itself. This is just an example of a site restricted Google search. Feel free to play with the keywords if needed and date filter results as desired.
https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=why%20high%20limits%20site%3Aficoforums.myfico.com
Consider:
- The standard FICO factors and their typical weights: http://www.myfico.com/crediteducation/whatsinyourscore.aspx
- Revolving Utilization has a significant impact and falls under Amounts Owed, the second biggest factor typically at ~30%.
- Lower Revolving Utilization is better with a generally suggested maximum of 30% and ideal falling well under 10%
- Revovling Utilization = balance(s) / limit(s).
What happens when you increase the numerator in a fraction? You end up with a smaller number. Since limit(s) is the denominator, having higher limits means that it's easier to have lower reported Revovling Utilization.
That said, one can always reduce Revolving Utilization by paying down balances prior to report date as well.
@Anonymous wrote:
Unless I hit the lottery or find a buried treasure in my backyard, I can see myself spending around $2000 per month on my credit cards and paying them full each month.
Again, considering the impact of Revolving Utilization, don't look at limits as how much you intend to spend. If the general suggestion is "do not exceed 30%" then you want around 3x your spend in limits but more doesn't hurt if it gets you lower. 10x your spend or more would probably be ideal.
My spend and limits put me at 3% and that's with a balance being carried on a 0% offer.
@Anonymous wrote:
why would I need any more than that?
It's up to you to determine that just as it is to determine which cards suit you and other things regarding your credit. Different people have different levels of spend, need different limits to cover their spend, keep revolving utilization in check, etc. You have to sort out what works for your and what your targets are. Instead on focusing on just limits, educate yourself on credit scoring and assessment. Use that info along with your spend and other criteria to determine what you need/want.
If your targeted Revolving Utilization is 2-3% then you wouldn't need any more than $80K - $100K for $2K of spend.
@Anonymous wrote:
Please understand that I am not trying to bash anyone but just not sure what the advantage is.
There are certainly those who continually seek out higher limits just for the sake of having higher limits or for bragging rights but, again, it's up to the individual to determine what one's priorities and goals are.
