cancel
Showing results for 
Search instead for 
Did you mean: 

Total Credit Limit versus Income ?

Highlighted
Established Contributor

Re: Total Credit Limit versus Income ?

I look at it more as quality vs. quanity. There is not an account in my lineup that doesn't serve a strategic purpose.

 

I see a lot of people gorging on cash back cards and dividing their spend up across 10 cards/10 categories. That is no better than using a 5% coupon when they shop. Some of it of course is to support a rebuild and that is understandable.

 

My story was I was all cash for a long time. Work clothes for me are a big expense so I got a Macy's card. Then I got into NFCU as a checking customer and credit unions are known for high limit cards. I picked up a couple cards as promotional offers as part of car loans. Then as my spending moved up I needed overdraft protection so I got CLOCs.

 

For about 8 years I was running my utilization between 75% and 95% so naturally I sought CLIs when possible to stay ahead of it. Better than filing chapter 7 or selling my home to pay it off. But I was paying too much interest even when using BTs to help reduce it. So I decided to go to the PIF model for new spending to then reduce it which my checking was ready to handle with the CLOCs.

 

Now I'm after PLOCs to support a home construction bid. That will punch my credit line up into the 400k range. I need CL that high with 100k of unsecured cash floating around at any given time to keep the utilization scores low. 

Official travel point totals as of 10/21/20 (Goal Free Travel)
Chase Ultimate Rewards 138,068
World of Hyatt 81,381
Southwest Rapid Rewards 61,000
AMEX Membership Rewards 54,694
AA Advantage 15,144
United MileagePlus 13,316
British Airways Avios 11,332
NASA Platinum Rewards 1883
Marriott Bonvoy 1,350
Expedia Points 740
Hilton Honors 481
Delta Sky Miles 123
Virgin Atlantic Virgin Points 100
Jet Blue TrueBlue 66
Hotels.com Rewards 6/10 ($135.99)

Official cashback as of 9/19/20 (Goal Fund Roth IRA)
Acorns 1039.37
Retail Me Not 208.59
Top Cashback 39.08
DOSH App 39.08
PEI App 35.05
Raise Cash 27.49
Club Overstock 23.87
Mr. Rebates 14.65
Discover 4.03
NFCU Rewards 2.96


Other Point Category
Freebird 3,500
Samsung Rewards 2,857
Open Table 1,800
Message 41 of 54
Highlighted
Valued Contributor

Re: Total Credit Limit versus Income ?

The secret sauce is one's income itself. Someone making $25k/year with 4x their income in CL is going to be a lot more common than someone making $250k/year with 4x their income in CL. It's pretty easy with good credit to get $10,000-$30,000 limits on several cards, regardless of income, so even a few can quickly add up to multiples for someone with lower income, but that $250k person is going to need to produce some financial records, make some calls, and/or own a lot of cards to hit $1 million in CL.

 

I would expect most who have several multiples of their income in CL also have lower incomes (<$100k).

Message 42 of 54
Highlighted
Senior Contributor

Re: Total Credit Limit versus Income ?


@iced wrote:

The secret sauce is one's income itself. Someone making $25k/year with 4x their income in CL is going to be a lot more common than someone making $250k/year with 4x their income in CL. It's pretty easy with good credit to get $10,000-$30,000 limits on several cards, regardless of income, so even a few can quickly add up to multiples for someone with lower income, but that $250k person is going to need to produce some financial records, make some calls, and/or own a lot of cards to hit $1 million in CL.

 

I would expect most who have several multiples of their income in CL also have lower incomes (<$100k).


@GApeachy wrote:

If ratio's even mattered, I would imagine income would play into that as well.


@iced 

Okay, that's ^^^^^ what I was wondering. thanks!

”MY TAKE HOME PAY DON’T TAKE ME HOME”
Message 43 of 54
Highlighted
Moderator Emeritus

Re: Total Credit Limit versus Income ?


@tacpoly wrote:

@Revelate wrote:
Forwarned is forearmed is my thinking Tacpoly.

I have seen others over the years have lender swipe their limits or accounts even in today’s loose UW world. Notable example was Cap 1 which pared back a bunch of limits at 25k and higher anecdotally.

I had done a strategic CLD to 10K on my own Cap 1 tradeline and didn’t get touched.

There are algorithms which go hunting for various consumers that are either risky or probably unprofitable. It has been years since I needed more than 10K on even a default spender in any given month, and as a result that is a tradeline that not only works for me but isn’t outsized.

I have too many accounts for my use case, I can’t argue that at all. Chase is unlikely to screw with me as they know I can go right across the street to BOFA and I am in both of their new target demographics... but when it comes to tradelines that are unlikely to get taken away short of a BK Cap 1 rates highly there and playing needle in the haystack is a good defensive strategy in my opinion.

Attempting to channel the credit force vs the evil algorithms: I am not the consumer you are looking for.

Are you saying that during the recession banks actually reduced the credit limits of people who were paying all their cc bills in full every month?  Or did they slash the limits on people who were only partially paying their cc bills or whose debts may have been increasing, even if slowly?  If the former, then sure, pad limits. But if it was the latter, as I suspect it actually was, then credit limits shouldn't be increased, it should be savings. 

And again, I'm not accusing you of doing this, I'm merely questioning some of the assumptions (and perceived wisdom) prevalent on this forum.

 

Maybe we shouldn't be asking about folks' credit limits but about how much of their limits they can reasonably pay in full every month. 


Both and worse they outright just closed accounts back in those days after the mortgage crisis hits.  

 

If you go back far enough even on this forum you'll see horror stories which were still the conventional wisdom when I joined in 2011.  

 

Just in general any outlier data is going to be flagged as anomalous even by the most lax algorithms... and when banks go into super conservative crunch mode and they're trying to redeploy their capital as quickly as possible out of consumer credit card lending, it was bloody and it will be again if the economy gets to that point in the future.

 

I was one of the earlier people on this forum to realize that by the time 2012-2013 came around the lenders were back in the swing again in terms of plowing money into their CC portfolios, but 2007-2010 or so: credit plague.




        
Message 44 of 54
Highlighted
Senior Contributor

Re: Total Credit Limit versus Income ?


@Revelate wrote:

@tacpoly wrote:


Are you saying that during the recession banks actually reduced the credit limits of people who were paying all their cc bills in full every month?  

 

 

Both and worse they outright just closed accounts back in those days after the mortgage crisis hits.  

 

@tacpoly   For one, a lot of those ppl that were pif'ers, which the banks considered their less risky clients, ended up becoming maxed out and defaulting once the recession was in full swing.  A lot of jobs were lost; a lot of life long savings and planning out the window.  It might have taken as long as three, four or five years, but when some rock solid ppl fell; it was hard.

Last time, the banks didn't have Pre-recession jitters, noone was implementing a course of action should the "bubble" burst.  The writing was on the wall, we discussed the writing on the wall, but there wasn't any significant scaling back until after the fact; after the "bubble" did indeed burst and it STILL came as a surprise.  The coffers were wide open and the winds of change blew it all out the window along with every "what if". 

Do you remember the foreclosure column in the local Saturday newspaper once a month?   Do you remember how it grew to pages upon pages, and printed sometimes on a daily basis but weekly became the norm? How about it listing ppl that you thought were bullet proof.  Well some of that was due to the banks taking a belated defensive stance.  The banks were in a panic.  They start pulling the rug out from under their clients feet....calling in notes was one of the harshest stances they took.  For instance, Developers making their pymts., banks called the note, Developer folded.  Quick and very painful.  Solved nothing and all due to full on histeria.  Banks made decisions that in turn threw more fuel on the fire. No plan; no implementation; no clue....it was a wake up call.  Banks are going to protect their butts, squelch that flame at the first sign we're going into another recession.  Scaling back; lowering risks. A cld is nothing; no real loss it's simply Tightening the belt.   They won't care that you've been an outstanding client; they're going to lower the risks.

”MY TAKE HOME PAY DON’T TAKE ME HOME”
Message 45 of 54
Highlighted
Established Contributor

Re: Total Credit Limit versus Income ?


@GApeachy wrote:

@Revelate wrote:

@tacpoly wrote:


Are you saying that during the recession banks actually reduced the credit limits of people who were paying all their cc bills in full every month?  

 

 

Both and worse they outright just closed accounts back in those days after the mortgage crisis hits.  

 

@tacpoly   For one, a lot of those ppl that were pif'ers, which the banks considered their less risky clients, ended up becoming maxed out and defaulting once the recession was in full swing.  A lot of jobs were lost; a lot of life long savings and planning out the window.  It might have taken as long as three, four or five years, but when some rock solid ppl fell; it was hard.

Last time, the banks didn't have Pre-recession jitters, noone was implementing a course of action should the "bubble" burst.  The writing was on the wall, we discussed the writing on the wall, but there wasn't any significant scaling back until after the fact; after the "bubble" did indeed burst and it STILL came as a surprise.  The coffers were wide open and the winds of change blew it all out the window along with every "what if". 

Do you remember the foreclosure column in the local Saturday newspaper once a month?   Do you remember how it grew to pages upon pages, and printed sometimes on a daily basis but weekly became the norm? How about it listing ppl that you thought were bullet proof.  Well some of that was due to the banks taking a belated defensive stance.  The banks were in a panic.  They start pulling the rug out from under their clients feet....calling in notes was one of the harshest stances they took.  For instance, Developers making their pymts., banks called the note, Developer folded.  Quick and very painful.  Solved nothing and all due to full on histeria.  Banks made decisions that in turn threw more fuel on the fire. No plan; no implementation; no clue....it was a wake up call.  Banks are going to protect their butts, squelch that flame at the first sign we're going into another recession.  Scaling back; lowering risks. A cld is nothing; no real loss it's simply Tightening the belt.   They won't care that you've been an outstanding client; they're going to lower the risks.


The banks took action against people who "ended up becoming maxed out and defaulting once the recession was in full swing", but did they cut the limits of people who never displayed any financial stress throughout?  

 

Frankly, I lived in a weird environment during the recession.  Lending standards (e.g. 20-50% down) and financial requirements (e.g. 2 years reserve) to buy a place were such that the housing market wasn't hit as hard.  Prices fell, but it didn't result in massive numbers of foreclosure. Most of the people I know took advantage and bought real estate -- either upgrading or investing -- during that time.

Message 46 of 54
Highlighted
Senior Contributor

Re: Total Credit Limit versus Income ?


@tacpoly wrote:

@GApeachy wrote:

@Revelate wrote:

@tacpoly wrote:


Are you saying that during the recession banks actually reduced the credit limits of people who were paying all their cc bills in full every month?  

 

 

Both and worse they outright just closed accounts back in those days after the mortgage crisis hits.  

 

@tacpoly   For one, a lot of those ppl that were pif'ers, which the banks considered their less risky clients, ended up becoming maxed out and defaulting once the recession was in full swing.  A lot of jobs were lost; a lot of life long savings and planning out the window.  It might have taken as long as three, four or five years, but when some rock solid ppl fell; it was hard.

Last time, the banks didn't have Pre-recession jitters, noone was implementing a course of action should the "bubble" burst.  The writing was on the wall, we discussed the writing on the wall, but there wasn't any significant scaling back until after the fact; after the "bubble" did indeed burst and it STILL came as a surprise.  The coffers were wide open and the winds of change blew it all out the window along with every "what if". 

Do you remember the foreclosure column in the local Saturday newspaper once a month?   Do you remember how it grew to pages upon pages, and printed sometimes on a daily basis but weekly became the norm? How about it listing ppl that you thought were bullet proof.  Well some of that was due to the banks taking a belated defensive stance.  The banks were in a panic.  They start pulling the rug out from under their clients feet....calling in notes was one of the harshest stances they took.  For instance, Developers making their pymts., banks called the note, Developer folded.  Quick and very painful.  Solved nothing and all due to full on histeria.  Banks made decisions that in turn threw more fuel on the fire. No plan; no implementation; no clue....it was a wake up call.  Banks are going to protect their butts, squelch that flame at the first sign we're going into another recession.  Scaling back; lowering risks. A cld is nothing; no real loss it's simply Tightening the belt.   They won't care that you've been an outstanding client; they're going to lower the risks.


The banks took action against people who "ended up becoming maxed out and defaulting once the recession was in full swing", but did they cut the limits of people who never displayed any financial stress throughout?  

 

Frankly, I lived in a weird environment during the recession.  Lending standards (e.g. 20-50% down) and financial requirements (e.g. 2 years reserve) to buy a place were such that the housing market wasn't hit as hard.  Prices fell, but it didn't result in massive numbers of foreclosure. Most of the people I know took advantage and bought real estate -- either upgrading or investing -- during that time.


Read Purple^^^

”MY TAKE HOME PAY DON’T TAKE ME HOME”
Message 47 of 54
Highlighted
Senior Contributor

Re: Total Credit Limit versus Income ?

eta:5 According to the Federal Reserve Board’s July 2008 Senior Loan Officer Opinion Survey on Bank
Lending Practices, “about 65 percent of domestic banks — up notably from about 30 percent in the April
survey — indicated that they had tightened their lending standards on credit card loans over the past three
months.… In addition, considerable fractions of respondents reported having increased minimum required
credit scores … and reduced the extent to which such loans were granted to customers who did not meet
their bank’s credit-scoring thresholds. Finally, large net fractions of banks noted that they had lowered
credit limits on credit card accounts over the past three months.”https://www.philadelphiafed.org/-/media/consumer-finance-institute/payment-cards-center/publications...

 

 

"First of all, it was common for banks to reduce their customers’ credit lines en masse during the Great Recession in order to mitigate the risks associated with widespread defaults during this time period"

https://wallethub.com/edu/cc/lower-the-credit-limit-without-notification/25526/

 

Plus, if a bank has promised you a $50,000 line of credit, they always need to have that $50,000 available to you. It’s a lot easier to only make $10,000 available to you.

https://www.consolidatedcredit.org/financial-news/credit-card-limits/#gref

However, in addition to your credit score, credit card companies also increase or decrease limits based on the economy. Limits go up when the economy is good. Then creditors scale back when they think the economy is headed for a downturn.

”MY TAKE HOME PAY DON’T TAKE ME HOME”
Message 48 of 54
Highlighted
Established Contributor

Re: Total Credit Limit versus Income ?

Well, somehow the folks I know escaped the widespread credit limit slashing during the Great Recession.  I thought it was because we paid our cc bills in full and went on with life like normal (actually, a few people spent more because of crazy sales -- remember when Saks took 80% off everything?! -- and availability of luxury goods.)  But if credit card companies were willy-nilly cutting limits for everyone, then it was sheer good luck. 

Message 49 of 54
Highlighted
Moderator Emeritus

Re: Total Credit Limit versus Income ?


@tacpoly wrote:

Well, somehow the folks I know escaped the widespread credit limit slashing during the Great Recession.  I thought it was because we paid our cc bills in full and went on with life like normal (actually, a few people spent more because of crazy sales -- remember when Saks took 80% off everything?! -- and availability of luxury goods.)  But if credit card companies were willy-nilly cutting limits for everyone, then it was sheer good luck. 


Well banks also knew what markets were imploding.

 

It's entirely possible based on your zip code that you weren't considered risky, or maybe based on your mortgage balance (which doesn't have the same nasty red-lining connotation).  Probably the second one, if you have paid off 50% of the mortgage it's unlikey you're going to go under water enough for the bank to lose money.  Also I'd note if your buddies were buying / upgrading / investing, that's a large difference than the legions of people we read about living paycheck to paycheck, you're in the minority on that front certainly.

 

I know that stories on this forum have to be taken with a grain of salt in that they're never 100% complete even when the intention is to be completely transparent (we don't hear the lender's side of the story), but they were so prevalent and going on the premise that even cliches have a grain of truth, it's hard to argue there wasn't a big backlash from the lenders when they started tightening their belts.




        
Message 50 of 54
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.