Reducing limit on secured credit card

[Anonymous]

Hello All,

I have a secured credit card from my bank for $2500. I am closing on a house soon so it has soleved its purpose. I have always paid balances in full and don’t indent to keep any balances. I am thinking of reducing the limit to $250 and still keep only 5% usage and I could use the rest of the secured money I paid. Considering I have no other credit cards will hurt my score or closing it clean will be better ?

[Anonymous]

As long as you have 3+ other cards with low balances it won’t hurt your score to do either.

[Anonymous]

I don’t have any other credit cards. My goal was to buy the house which I have done and can wait it out for as along as it takes to get a decent credit card since I don’t keep balances and treat it as cash. Also after more than 7 years as a bank customer and having this card for over a year they declined me a credit card so I don’t see this relationship with the bank going very far. Also I need the deposit back more than I need a credit card, just want to know what kind of hit I should expect.

[Anonymous]

Lowering the limit will have no effect as long as you don’t report more than 8.9% utilization against the new limit.

closing it could drop your FICO score majorly.  Has you had a total of 3 credit cards 12 months before your mortgage application you would have had a higher FICO score.

you always want 3 credit cards open and showing very low utilization on just one.  Your credit score will affect insurance prices for the rest of your life among other things.

you also won’t qualify for decent cards if you don’t have open cards reporting responsible use over a period of time.

reducing the credit limit is fine but closing it is detrimental.

[Anonymous]

I have been getting Pre-Approved offers from Capital one every other week but have been afraid to apply. How do I increase the number of cards ? Do you recommend getting more secured cards or apply for the Pre-Approved offers I get ? Considering I just had a bank inquiry 2 days agao ?

[marty56]

Reducing the CC limit amounts to AA'ing on yourself and has no benefit whatsoever.  I would look at possibly joing a local CU and if you take youre CR to them, they may give you an idea if they would offer you a CC.  If not it won't cost you an INQ if you don't join.  If you post more info on your credit history in the CC section of the forum, poeple may give you ideas if you would get approved without having to do an INQ.

[Anonymous]

Don’t open any new credit cards until you close on your mortgage!

[Anonymous]

Why do you say that. The loan has been approved and I am closing next Friday. I did get approved by discover IT for $11000 last night and they are sending me the card. Also mine is an FHA loan, I was not expecting that limit but I am traveling to India on Dec 2nd and need to do a lot of shopping so the cash back will come real handy. I will not keep any balances. My other credit card reported a balance of $20 on a $2500 limit.

[Anonymous]

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@Anonymous wrote:
Why do you say that. The loan has been approved and I am closing next Friday. I did get approved by discover IT for $11000 last night and they are sending me the card.

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Because until the docs are signed and the keys are in your hands as the new homeowner, they may pull your credit reports again and new accounts can penalize your score or could bring up issues in last minute underwriting approvals.

Be prepared to answer some questions if they pull your reports again.

The rule of thumb is to not apply for ANY credit for 6 months before a mortgage closing, 6-12 months is better.  The "closing" part is the key, not the approval.

[Anonymous]

I understand now but it’s done, I added to my reply above that mine is a FHA loan, approved last Friday so hopefully that will not be so bad what do you think ?, also I am traveling to India and i know I will spend on gifts so cask back is really nice but will have no balance. My other credit card with $2500 limit has a $20 balance. I am nervous though, but loan was just approved last Friday.