Why is "too much" credit "bad"?

[Anonymous]

I would like to hear your guys's opinions  

For example, I personally have over 100k in credit but I don't see anything that can go wrong as long as you have firm and solid self control. I don't buy anything I don't need or can't afford. I will never, in my life, put a balance that I cannot pay down, because if I am at that point, I would be using my emergency funds.  

I want to hear what you guys think! 

Edit: I mean for us, as consumers/individuals, rather than the lender's point of view. 

[Anonymous]

An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying.  You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

[Anonymous]

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@Anonymous wrote:

An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying.  You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

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Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though . 

[Anonymous]

Also not everyone has the luxury of having an emergency fund.  For them their credit cards are their emergency funds.  Or even if you have an emergency fund something beyond what you financially expect comes up like a medical emergency, lay off, theft, family issues, etc.

[Anonymous]

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@Anonymous wrote:

An employee at a credit union posted on here that there is an industry term "Break Out Fraud" or "Bust Out Fraud" for those that get too much credit (in a short period of time) with intentions of running them up and not paying.  You can read what they said here:

http://ficoforums.myfico.com/t5/Credit-Cards/Comenity-cards-closed/m-p/4685340

So you and a bunch of other people might have no intention of every using near their limit, but the banks and credit unions have to keep an eye out for any signs of things going in a bad direction.

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Read that also.  Very interesting.  It explains a lot of what has been happening.   You need to go on app sprees in sprints.  Not too many at one time and let them age.  I haven't put much on most of my cards right now because we're trying to finish our home.  So just some larger charges for it on prime's only.  

[Anonymous]

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@Anonymous wrote:

Also not everyone has the luxury of having an emergency fund.  For them their credit cards are their emergency funds.  Or even if you have an emergency fund something beyond what you financially expect comes up like a medical emergency, lay off, theft, family issues, etc.

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Right, but let's say someone has a vast amount of liquid assets to cover all of that. 

[Anonymous]

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@Anonymous wrote:

Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though . 

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The bad side for us is that some lenders do not like individuals with lots of credit.  For example, Penfed has the term "pyramiding credit" that they use as a denial reason.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

Sorry about that, I didn't write my post detailed enough. I meant to say why would it be bad for us, rather than the banks/lenders. Thank you for the informative link though . 

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The bad side for us is that some lenders do not like individuals with lots of credit.  For example, Penfed has the term "pyramiding credit" that they use as a denial reason.

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Wow, I have never heard that. It's the same as "too much available credit" right? 

Edit: I have heard of people being denied for "too much available credit" but I would say that is because their income/application profile doesn't support it. That's why we know our highest exposure from lenders. 

[Anonymous]

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@Anonymous wrote:

Right, but let's say someone has a vast amount of liquid assets to cover all of that. 

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Not many credit card lenders (if any) ask for a personal balance sheet.  For personal loan or mortgage they'll probably go deeper and ask for that.  But I've never a credit application with fields for assets/liabilities/networth.  Well now that I think about it, in the past I may have had to select a pull down asking what was your liquid asset value range.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

Right, but let's say someone has a vast amount of liquid assets to cover all of that. 

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Not many credit card lenders (if any) ask for a personal balance sheet.  For personal loan or mortgage they'll probably go deeper and ask for that.  But I've never a credit application with fields for assets/liabilities/networth.  Well now that I think about it, in the past I may have had to select a pull down asking what was your liquid asset value range.

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Mhmm that is what I was referring to. Just filled out a BOA app and it asked for that. I believe Citi asks for that too....(I forgot in a couple minutes, barely got approved for citi dc lol)