Will lowering my available credit on CC's affect my credit, Good or Bad?

[Anonymous]

My Wife and I have good credit, around 750. We have 4 credit cards, two with zero balances but high avaiable credit. The other two, one with $12k and the other with $5k are about to be payed off next month. The ones with $0 balances now have a $27,500 available, and the other with $16,000 limits. I wanted to close the cards but I know that can be bad, so I was considering asking the CC company to lower our available credit to say 5 or 10. Will that hurt our credit or help? I was thinking that having a high possible available credit would hurt our scores??? Thanks for your input

[Anonymous]

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@Anonymous wrote:

My Wife and I have good credit, around 750. We have 4 credit cards, two with zero balances but high avaiable credit. The other two, one with $12k and the other with $5k are about to be payed off next month. The ones with $0 balances now have a $27,500 available, and the other with $16,000 limits. I wanted to close the cards but I know that can be bad, so I was considering asking the CC company to lower our available credit to say 5 or 10. Will that hurt our credit or help? I was thinking that having a high possible available credit would hurt our scores??? Thanks for your input

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No.  There is no scoring model (not even Vantage 3) that considers having large credit limits bad.  Indeed, some non-FICO models (e.g. the ones used by the insurance industry and also Vantage) consider big credit limits good. Those models call this factor ACL or Average Credit Limit.  ACL is not a scoring factor for FICO.

Do you understand how the CC utilization scoring factor works for FICO?  Is it clear that you want a very low number for the best scores?  And if so, is it clear that with lower credit limits you have to work harder to have a very low utilization?

In summary, there's no upside and possible downside to trying to lower your credit limits.

[Anonymous]

I'll co-sign everything CGID stated above.

OP, do you typically carry balances for extended periods of time?  You mentioned paying off 2 accounts in a month or so.  Are those balances from a month prior or are they balances that have been there for an extended period of time?

If you're the type of person that carries balances (which I and others like CGID would strongly suggest reconsidering if so) than having the higher credit limits will aid your utilization by helping keep it lower.  That in turn will assist your scores.  If you typically don't let balances report every month and you always pay off your cards, reducing your limits likely wouldn't have much of an impact on your scores, as your utilization wouldn't change much at all.  That still doesn't mean you should reduce those limits, because who knows when you may need to carry a balance due to some unexpected life event at some point in the future.  I'd suggest leaving them be.

[Anonymous]

I think I do understand now...We do plan on carry balalnces from time to time so I guess keeping our credit limits up there will help keep a low utilization! 

Thanks CGID!

[Anonymous]

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@Anonymous wrote:

I'll co-sign everything CGID stated above.

OP, do you typically carry balances for extended periods of time?  You mentioned paying off 2 accounts in a month or so.  Are those balances from a month prior or are they balances that have been there for an extended period of time?

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Those other credit cards are balances from an extended period. We are finally crawling out of our CC debt. Thats why I had questions. I just want to keep our good credit going and I wasnt sure about the limits. I will plan on leaving all alone! Thank you both for all help!!!

[Anonymous]

I must ask you how you have a credit score that is above a negative number?  The only reason I ask is that you say you pay your credit card balances off to zero.  Every time I've EVER paid anything off to a zero balance.....credit cards, school loans, anything else, my credit scores plumment to the bottom although I don't close any accounts and there are no other changes in my life that would effect my credit scores.  My guess is that once my car is paid for my credit scores from transunion, experian, and equifax will be somewhere in the ranges of triple negative numbers such as - - - 1,000,000,000,000,000 .  Its really sad that we all as humans live in a world that stands for the such.  Whats wrong with having credit cards and loans and the such and making your payments in the full amounts due each month on time or early and not trying to get new credit non stop....hence just being a responsible, reasonable, credit worthy human.....I see nothing wrong with this.

[Anonymous]

There's nothing wrong with it.  It's just that the current algorithm can't "see" usage unless it's reported as a balance.  This is why everyone on this forum knows to let a small balance report on exactly 1 credit card every month.  Perhaps future FICO versions will be able to use trended data and not have to go off of just reported balances.  For now, it is what it is and the work-around is super simple.

[Anonymous]

Hello Sas33!  Welcome to the forums.

The FICO 8 score (i.e. the credit score) varies between 300 and 850. Negative numbers for a FICO score are not possible.

If all of a person’s credit cards report $0 in a given month, that can cause a moderate drop in his score (e.g. 20 points). That’s easy to avoid using the technique you mention: allowing your CC statements (at least one) to print with a positive balance, and then paying it in full. That ensures that you always have a positive CC balance reporting.

Installment loans are trickier. It is true that with FICO 8 paying off a loan can result in a score drop. But that can be avoided by using something called the Share Secure Loan technique. It costs you almost nothing and is painless to set up. You can find out more about it here (just read the first couple posts):

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

I agree that there’s no need to try to get credit nonstop. Get a few cards, get an SS loan if you don’t have an open installment loan, and then coast. No need to do more than that.