Credit to income question

[Anonymous]

I've been doing fairly well lately, when it comes to credit. Before the August of 2014, my overall credit was at $0. I hadn't had a credit card for many years since I had totally trashed my credit in my early 20's. Got a secured $1500 Visa that August and as of today, I have several Visas, an Amex, a Discover, a car loan, a few store cards, and a PLOC with PenFed. I've gotten great CLIs on my Amex (started at $2k, now at $15k) and my Discover (started at $7.5k, now at $17k). Currently, my overall credit is just over 2x my income and utilization is at about 10%.

I'm in the market for a new TV and a home gym and have been considering opening  a couple new accounts to finance them (both have 24 month 0% interest). The thing is, I'm kind of scared to get any more credit. I haven't had a new account since September, yet my limits have increased by an additional $20k in just CLIs alone since then. Now that I'm over 2x my income, I'm afraid of a bank freaking out and decreasing my limits or closing my accounts. My payment history is perfect, my utilization is decent, and my lowest fico score according to MyFICO is in the mid 700s but I'd hate to do something to spook any of my creditors.

My question is, at what point would creditors start to typically get nervous, in terms of credit-to-income ratio? I'd really like to apply to these accounts soon but I'd hate to get approved with nice limits, only to climb closer to 3x my income and cause any kind of AA.

Thanks in advance.

[RobertEG]

How are the creditors aware of your current income?

[CH-7-Mission-Accomplished]

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@Anonymous wrote:

I've been doing fairly well lately, when it comes to credit. Before the August of 2014, my overall credit was at $0. I hadn't had a credit card for many years since I had totally trashed my credit in my early 20's. Got a secured $1500 Visa that August and as of today, I have several Visas, an Amex, a Discover, a car loan, a few store cards, and a PLOC with PenFed. I've gotten great CLIs on my Amex (started at $2k, now at $15k) and my Discover (started at $7.5k, now at $17k). Currently, my overall credit is just over 2x my income and utilization is at about 10%.

I'm in the market for a new TV and a home gym and have been considering opening  a couple new accounts to finance them (both have 24 month 0% interest). The thing is, I'm kind of scared to get any more credit. I haven't had a new account since September, yet my limits have increased by an additional $20k in just CLIs alone since then. Now that I'm over 2x my income, I'm afraid of a bank freaking out and decreasing my limits or closing my accounts. My payment history is perfect, my utilization is decent, and my lowest fico score according to MyFICO is in the mid 700s but I'd hate to do something to spook any of my creditors.

My question is, at what point would creditors start to typically get nervous, in terms of credit-to-income ratio? I'd really like to apply to these accounts soon but I'd hate to get approved with nice limits, only to climb closer to 3x my income and cause any kind of AA.

Thanks in advance.

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I would listen to my gut if I were you.  10% utilization on credit limits of 2X annual income isn't that low of utilization.

Amazon Prime card offers extended interest free financing on major purchases.  Have you looked into that?  You might be able to use that card and not open any new accounts.

[Anonymous]

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@CH-7-Mission-Accomplished wrote:

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@Anonymous wrote:

I've been doing fairly well lately, when it comes to credit. Before the August of 2014, my overall credit was at $0. I hadn't had a credit card for many years since I had totally trashed my credit in my early 20's. Got a secured $1500 Visa that August and as of today, I have several Visas, an Amex, a Discover, a car loan, a few store cards, and a PLOC with PenFed. I've gotten great CLIs on my Amex (started at $2k, now at $15k) and my Discover (started at $7.5k, now at $17k). Currently, my overall credit is just over 2x my income and utilization is at about 10%.

I'm in the market for a new TV and a home gym and have been considering opening  a couple new accounts to finance them (both have 24 month 0% interest). The thing is, I'm kind of scared to get any more credit. I haven't had a new account since September, yet my limits have increased by an additional $20k in just CLIs alone since then. Now that I'm over 2x my income, I'm afraid of a bank freaking out and decreasing my limits or closing my accounts. My payment history is perfect, my utilization is decent, and my lowest fico score according to MyFICO is in the mid 700s but I'd hate to do something to spook any of my creditors.

My question is, at what point would creditors start to typically get nervous, in terms of credit-to-income ratio? I'd really like to apply to these accounts soon but I'd hate to get approved with nice limits, only to climb closer to 3x my income and cause any kind of AA.

Thanks in advance.

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I would listen to my gut if I were you.  10% utilization on credit limits of 2X annual income isn't that low of utilization.

Amazon Prime card offers extended interest free financing on major purchases.  Have you looked into that?  You might be able to use that card and not open any new accounts.

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This is what jumped out to me. It would scare me to owe 20% of my income in one month. From browsing these forums it seems that limits like that aren't uncommon, but if I were a lender, it might make me nervous.

[Anonymous]

The real issue is not creditors being reluctant to grant you more credit, but the fact that you are apparently ok with owing 20% of your annual salary to credit card companies.  More just being ok with that, you would like to go into debt further for more purchases: a TV, a home gym, etc.

I know this will seem like a painful idea and counter to what you are doing, but I would suggest that, far from buying more stuff on credit, you need to forego the Tv and the home gym and develop a plan fo steadily paying off all of your CC debt.  The goal should be to pay your cards in full every month, and more than that, to lower your spending enough that you are saving a big chunk of your monthly salary, at least 20% of your take home pay, funneling it into vehicles like a Roth, or an emergency fund, or a fund for a house down payment, etc.  I am guessing you are doing little or none of that now, or you wouldn't owe 20% of your annual salary to CCCs.

Those are just my two cents, and intended with the best wishes for you.  Good luck on figuring out your own plan.

[Appleman]

Many of us understand the desire to get new things and that credit cards are are great way to achieve those goals. At one point in life I was certainly there, open credit needs to be utilized. 

Nobody here is preaching to you (much at least) but many of us have been down the road you are currently on. You mean I can have the big TV for only $42/month, that is a bargain. For the first months or maybe year it seems like a good idea but eventually you will be on to buy the latest Apple product or other electronic and you can also do that for only $50 a month. Without much effort it is very easy to live beyond ones means. In a nutshell that is what debt is, living beyond your means.

Spend some time setting up a budget, plenty of options out there, free or paid. Once you have set up a budget go to a site that will show you how long it will take to pay off your current debt based upon your budget. This process is very difficult for some as it requires you to say no to yourself. Honestly, there are days I still struggle with the idea and I am probably older than your Dad. 

I know that I wish someone would have provided this advice when I was younger, and more importantly that I would have listened to the advice. I have said in other posts, had I lived within my means, my life would look very different with many additional options available.

If you really do have your heart set on making a purchase, pick one and have it apid off prior to making another purchase.

[jbsea]

^ This