Lender recommends I get my credit limit lowered

[Anonymous]

I am trying to get pre qualified for a loan and the lender's scoring model came back with a denial. She explained that I was on the cusp and was just barely being denied. One of the negative items their scoring model stated was that I am being penalized for having a high credit limit credit card (Discover card with 20k) with a low balance (<9%). Their scoring model penalizes you for having a lot of available unused credit. She recommended that I call Discover and ask them to lower my available credit to 10k. Is this wise to do? It's possible it would help their specific scoring model but would it lower my FICO credit scores?

[hernaemm90]

As long as your utilization ratio stays the same your score will not move. If you lower your credit limit from 20K to 10K you would need to pay 50% of your current balance off to keep your utilization and thus your current FICO score the same. 

FYI, i'm not suggesting you credit limit decrease, i'm just saying if you choose to it doesn't have to hurt your FICO score.

[sarge12]

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@Anonymous wrote:

I am trying to get pre qualified for a loan and the lender's scoring model came back with a denial. She explained that I was on the cusp and was just barely being denied. One of the negative items their scoring model stated was that I am being penalized for having a high credit limit credit card (Discover card with 20k) with a low balance (<9%). Their scoring model penalizes you for having a lot of available unused credit. She recommended that I call Discover and ask them to lower my available credit to 10k. Is this wise to do? It's possible it would help their specific scoring model but would it lower my FICO credit scores?

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I am not going to try to tell you what you should do, but for me, it will be a cold day in hades that I allow a financial institution dictate my credit behavior. I am very comfortable telling them to pound sand. It is entirely up to you wheather or not the possible approval would be worth doing as they suggest. Only a mortgage at low interest rates has ever been important enough to me to do that. I feel the same way about a current credit card issuer demanding that I send them a 4506-T if they decide to do a FR on my account. I would be a firm no on that, today, tommorrow, or next year. If you have a good relationship with Discover, have you checked to see if they might match the terms of the loan you seek? I will admit that the attitude I have is much easier for me, because I do not need any credit period. I would not lose sleep if every card was closed, and every debt be called in for payment in full. Getting my finances in such a shape was not however an accident. I planned long ago to get my finances in such a shape that these banks have no control over me, and it included years of not borrowing for my wants. I just never liked banks having the level of control that I was willing to allow in my youth.

[SouthJamaica]

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@sarge12 wrote:

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@Anonymous wrote:

I am trying to get pre qualified for a loan and the lender's scoring model came back with a denial. She explained that I was on the cusp and was just barely being denied. One of the negative items their scoring model stated was that I am being penalized for having a high credit limit credit card (Discover card with 20k) with a low balance (<9%). Their scoring model penalizes you for having a lot of available unused credit. She recommended that I call Discover and ask them to lower my available credit to 10k. Is this wise to do? It's possible it would help their specific scoring model but would it lower my FICO credit scores?

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I am not going to try to tell you what you should do, but for me, it will be a cold day in hades that I allow a financial institution dictate my credit behavior. I am very comfortable telling them to pound sand. It is entirely up to you wheather or not the possible approval would be worth doing as they suggest. Only a mortgage at low interest rates has ever been important enough to me to do that. I feel the same way about a current credit card issuer demanding that I send them a 4506-T if they decide to do a FR on my account. I would be a firm no on that, today, tommorrow, or next year. If you have a good relationship with Discover, have you checked to see if they might match the terms of the loan you seek? I will admit that the attitude I have is much easier for me, because I do not need any credit period. I would not lose sleep if every card was closed, and every debt be called in for payment in full. Getting my finances in such a shape was not however an accident. I planned long ago to get my finances in such a shape that these banks have no control over me, and it included years of not borrowing for my wants. I just never liked banks having the level of control that I was willing to allow in my youth.

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I'm with you @sarge12 

[Anonymous]

I’ve got a very simple solution. Go charge up $10,000 on your credit card and then you will not have too much unused credit.

No I’m just kidding do not do that. But my point is if you were using that credit and had a higher level of debt they would not penalize you as such, isn’t that crazy? Only because it’s unused and you’re being responsible by not using it Do they penalize you. Crazy.

[HeavenOhio]

I'd look for another lender.

[Anonymous]

What kind of loan are you trying to get?  

Any lender saying no to being a responsible person with credit just doesn't know much about credit.  Sounds like it's time to shop for a different lender for whatever you're trying to finance.  If you tell us what you're doing we can point you in a better direction.

[Anonymous]

Sounds like hogwash to me.  I'd tell the lender to go kick rocks and look elsewhere.

As an aside/spinoff question, has anyone ever self-initiated a CLD and then later requested that it be reinstated?  Is that an option, or do you have to go through the CLI process?  If you have to go through the CLI process, would your CLI's come faster since you've of course got [known] greater growth potential on the account?

[Anonymous]

And that’s exactly what they’re doing, they’re penalizing you for being responsible with your credit.

As the other members said, I encourage you to seek out another lender.

Interesting questions BBS.

[Anonymous]

And here’s another thing. I understand where the Lenders coming from because they feel that you are a risk because you could go use up all that credit and then be way beyond your means and be unable to pay them back as well. But what if they were to approve this loan and after that you go and get CLI’s? Do they at some point want to accelerate your loan because they feel like you went and got too many CLI‘s?