For discussion as this no longer applies to my situation but I still wonder about it and maybe it will help others that aren't as far along in rebuilding or establishing credit.
Say you're a couple years into rebuilding your credit profile. Scores are now say 695-710 across the board and you maintain a 5% UTL with numerous cards reporting and all 100% positive. Throw in say a auto loan reporting at a good rate with it also 100% positive. All baddies if any are gone. But while you have three or four cards with $5,000-$20,000 limits you also still have several "starter cards" with limits of $300-$500 (with no AF) as well. So, you still some times get denied for new cards (or if approved get a lower SL) because (and I'm not sure how exactly lenders word this) but balance of over all cards to available limit due to those small limit cards. Being that yes they are also you oldest cards but if you close them they'll still report for 10 years, do you close them? Are they now hurting your credit at this point with those low limits more than they are helping you?
I dont think having low limit cards hurt you because of their limits. Its only when your utilization of them or any card is high. Many cards we get in rebuilding or establishing credit are meant to help us get better cards and its ok to close them when they no longer serve their purpose, imo. Why should i keep my Fingerhut when i have achieved an Amex or Chase or any other prime card?. Sentiment can make me keep it but its not necessary and we find after moving on there was no harm no foul
. That being said, most times having low limits only really affects how one views them. Just my thought
Having cards with lower limits in itself does not impact credit scoring. Individual revolving account utilization works the same when you have a $50 balance on a $500 card as it does when you have a $5,000 balance on a $50,000 card. The reason code you cited is related to overall utilization across all revolving accounts.
The cards in your hypothetical have no fees, so there would actually be some benefit in keeping them if they had $0 balances reporting as there are scoring metrics for number of cards reporting a balance and a penalty for 50% or more of cards reporting a balance.
I wrote this in another thread a few days ago, but I think it's more a case that those with many low limit cards have profiles that don't generally support higher limits, while those with higher credit limits generally have profiles that support those higher limits. Correlation does not equal causation.
I have a $500 Amex card (limit moved to another card) that I don't use but won't close because it's 20 years old. Also a Kohl's card at $4000 that isn't going to grow more (the cap is actually $3000 but I got it bumped during a brief window a few years back where they were allowing more). Those have never affected me. On the other hand, I have around 20 cards on my reports with limits in the $20-100k range, yet I have only had starting limits at or above $20k a handful of times and 3 of those were with credit unions known to be very generous with starting limits.
@Flex1 wrote:
@Red1Blue wrote:Common conception in the industry is cards with higher limits attract lenders to give higher limit cards. Lenders are more inclined to give higher limits to people with higher limit cards. Is it true?
This is absolutely true. People will always say "well, at least your in the door". Low limit cards get you more low limit cards and high limit cards get high limit cards....
Not necessarily.
