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Why do you all sometimes have more credit than you could ever reasonably use?

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Regular Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?

They did like our President. File for bankruptncy.
Message 11 of 47
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Super Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?

A BK isn't an automatic sign of financial failure.  It can be a sound, strategic business move depending on the circumstances.

Message 12 of 47
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Established Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?

Number one reason for BK - Medical expenses. then divorce/job loss.

 

I had job loss/business failure and divorce all in 2009. Barely avoided BK, fought and settled 40k for 10k maybe.

 

Fastest growing BK group - those under 30. Pretty sure of this. Between credit card debt and student loans, these kids don't have a chance.

Message 13 of 47
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Established Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?

“Better to have, and not need, than to need, and not have.”

 

 

 - Franz Kafka

 

 

Message 14 of 47
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Established Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?


@wa3more wrote:

I've also asked this question many times. I think it just gives people the opportunity to get in trrouble.

 

I also think it is part of the society we live in, one that is consumption oriented with the " i want this now" mentality.

 

Many people who over extended are among the almost 600k in postings in the credit repair and BK sections. Also the 1m+ people filing BK annually.

 

How did people even live before credit cards ???? I guessed they saved.


I read your response to impliy you think those with high credit lines spend beyond their means. I would venture to guess that for the typical myfico user with high CLs that could not be further from the truth. Additionally, it isn't that I couldn't live without credit cards. I only charge what I can pay for in cash. I just choose to use credit cards for a variety of reasons, such as: rewards, extended coverage (Warranty, price guarantee, etc), convenience. If someone took my cards away tomorrow, I'd be fine. And I'd bet the same is true for many who have very high CL's.

That said, my lines are not over household income (although they do exceed my personal income). My goal with CL's is to have them high enough to allow all monthly spend to post without being flagged for high balances.

Message 15 of 47
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Valued Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?


@flish wrote:

If you have a normal income of like $60,000 why would you have credit card available balances upwards of $60,000? If you lost your mind one day and decided to put a Porsche on your fancy AmEx, how would you pay for that? Why would you want all that available credit if it would destroy you if you used it? I've seen people here with like $400k in available credit and while that's super impressive it seems insane.


I don't know about this "you all" business. My total credit limit across all cards is less than my annual income. I could max out every card I have and still pay them off within a month. 

Message 16 of 47
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Established Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?

Iced,

 

My response is meant as someone COULD get into trouble. My 35+ years of finance experience has told me this.

 

I also don't think the typical Myfico user is immune from this possibility. Most come to this board to learn how to play the rules to maximize their debt score, which is what a credit score is. The more debt you have to manage, the better the score. Most of the wealthy people I know, have a couple of cards and that is it. Credit score ? Points ? They don;t care and they tell their kids to avoid this trap. I have also seen people with huge, unused credit lines, almost equal to their income go ch 7/13.

 

This isn't the 1980's. No more job security. Outsource/automation and so on and people have no income. Most people can't go  month. maybe 2, before they are flat broke.

Message 17 of 47
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Senior Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?


@iced wrote:

@flish wrote:

If you have a normal income of like $60,000 why would you have credit card available balances upwards of $60,000? If you lost your mind one day and decided to put a Porsche on your fancy AmEx, how would you pay for that? Why would you want all that available credit if it would destroy you if you used it? I've seen people here with like $400k in available credit and while that's super impressive it seems insane.


I don't know about this "you all" business. My total credit limit across all cards is less than my annual income. I could max out every card I have and still pay them off within a month. 


Good for you.

Message 18 of 47
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Frequent Contributor

Re: Why do you all sometimes have more credit than you could ever reasonably use?


@disdreamin wrote:

My goal with CL's is to have them high enough to allow all monthly spend to post without being flagged for high balances.


This. Exactly. 

 

I have several cards with decent limits (on average, about $17K per card), but I put EVERYTHING on my NFCU Visa Signature card. It has a limit of $30K, though I wish it was a wee bit higher. I use that card for everything: Typical purchases, utility bills, annual dog licenses/vet visits, property taxes, home/auto insurance. My cash back rewards are available as soon as charges hit my card, and I transfer them all into my NFCU MMSA, which is my "Mad Money" accout for treating/rewarding myself. I dip into it for a purchase about twice a year, and the account typically has around $5K in it.

And I can do this all without utilization concerns by simply making two payments a month instead of one. I just make sure that a few days before the statement cuts, I've paid it down to around 3%, as that seems to be the sweet spot.

 

I use only one of my other cards, and that's my Chase Amazon Prime Visa. They recently upped the Amazon Points rewards to 5%, so I now put all of my Amazon purchases on that card.


EX myFICO 850 - EQ myFICO 850 - TU myFICO 850
Goal Score: 800+ across the board! *DONE!!!*
Message 19 of 47
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Moderator Emeritus

Re: Why do you all sometimes have more credit than you could ever reasonably use?


@wa3more wrote:

Number one reason for BK - Medical expenses. then divorce/job loss.

 

I had job loss/business failure and divorce all in 2009. Barely avoided BK, fought and settled 40k for 10k maybe.

 

Fastest growing BK group - those under 30. Pretty sure of this. Between credit card debt and student loans, these kids don't have a chance.


Can't discharge student loans in a BK, and the younger generations appear to be avoiding credit cards in large numbers at least according to some statistics that have been posted over in Credit News.  Of course any statistics need to be taken with a grain of salt, but the common card I see with folks 10+ years younger than I am when we go out to eat is a Chase debit card.  Passing strange to me personally.

 

I'm not sure I read much into the assertion even if it is accurate (I haven't gone to Google to try to fact check) but I would suggest those of us 40+ were more likely to file BK at under 30 when we were that age too than we are now.  

 

Anyway back to the topic at hand, think it was mostly when people credit matured, and what their individual path was.  I wound up somewhere around 1:1 with my typical income and I wasn't even trying hard, and so it's not a big deal to me personally and taking CLD's doesn't strike me as aberrant behavior (even if non-trivial folks have labelled it somewhere between silly and stupid) but I "grew up" in the current sunshine credit market.  Those that had to scrap for every limit increase of new account through the mortgage crisis or historically after a BK (which was not the same as a BK recovery today, said sunshine spills everywhere credit wise)  apparently feel differently, and in my case probably knowing all too well what lenders can easily check from an algorithm perspective and a better than average understanding of Fractional Reserve Banking I guess. 

 

 

Yet another example of only knowing the world as it's presented to us I suppose.




        
Message 20 of 47
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