How much credit limit is too much?

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Topic Author
GrandDesigns
Posts: 83
Joined: Sat Jan 10, 2015 5:40 pm

How much credit limit is too much?

Post by GrandDesigns »

I might be ready to buy a home in 3 years, so I'm starting to make sure I have my credit in the best shape possible for that. One thing keeping my score at "Very Good" is a utilization rate that's too high. Since I need a backup card anyhow for when my Amex isn't accepted, I got a visa and citi gave me a surprising $30,000 limit at 12% apr. My Amex has a $13,000 limit that I would prefer to be $20,000.

A few questions:
1) Should I wait a certain period before trying to increase my Amex limit since I just got the visa?
2) Is $50k potentially too much total credit limit when I go for a mortgage? I make ~$300k a year, and have $200k in assets which obviously are increasing with time. The upside is if, God forbid, I ever needed extra money and fast having $30k at a lower interest rate is not a bad deal.
3) Would it potentially be better to reduce the Visa card to $20k to try and have $40k total?
swl
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Re: How much credit limit is too much?

Post by swl »

They look at credit usage, not limit. High limit reduces your usage ratios and should make you look better.
Scotttheking
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Joined: Wed Apr 09, 2008 7:58 pm

Re: How much credit limit is too much?

Post by Scotttheking »

1) No
2) No
3) No, it makes no difference.
Topic Author
GrandDesigns
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Joined: Sat Jan 10, 2015 5:40 pm

Re: How much credit limit is too much?

Post by GrandDesigns »

swl wrote:They look at credit usage, not limit. High limit reduces your usage ratios and should make you look better.
Interesting, I was told the bank might assume I max all my cards out and factor that in. Since I live in Silicon Valley and it'd be at least a $500k mortgage, I guess if might not be as big a factor. Maybe for someone making alot less and getting a $200k mortgage a $50k limit would factor in.
CuppedUp
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Re: How much credit limit is too much?

Post by CuppedUp »

Was the AMEX your only credit card prior to adding the citi?

Were you carrying a balance on the Amex? Or paying the statement balance in full when due?

If you were paying in full, you can just ask for a credit limit increase on the Amex. It's a Soft Pull CLI usually. You can ask for 3x your current limit. Repeat every 181 days.

Dont reduce the limit on the citi card. Each creditor has an internal max exposure limit and in general they don't care whether you have high limits elsewhere.

They do care if you have high utilization across multiple cards.

Optimal for FICO 08 scores is to have at least 3 open credit card accounts. With a small utilization reported on exactly one card.
Topic Author
GrandDesigns
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Re: How much credit limit is too much?

Post by GrandDesigns »

CuppedUp wrote:Was the AMEX your only credit card prior to adding the citi?
I have the MasterCard I got when I turned 18 (2008) from my local bank with a $1,000 limit. I really want to close the useless card. My AmEx is only 6 months old.
Were you carrying a balance on the Amex? Or paying the statement balance in full when due?
I always pay in full.
If you were paying in full, you can just ask for a credit limit increase on the Amex. It's a Soft Pull CLI usually. You can ask for 3x your current limit. Repeat every 181 days.
Should I really go for a $39,000 limit? That almost feels excessive, especially if fraud happens.
Optimal for FICO 08 scores is to have at least 3 open credit card accounts. With a small utilization reported on exactly one card.
Thanks for the advice. Should I keep the local bank card from 2008 then? Unfortunately I might never got to an 08 score right now because my sole debt are the cards that I always pay in full. I guess they want to see a mix of debts but what can I do? Take out student loans I don't need just to have the payments? :mrgreen:
CuppedUp
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Re: How much credit limit is too much?

Post by CuppedUp »

Definitely don't close the MasterCard just yet. Especially if it has no annual fee.

You don't have to ask for 39k with Amex. You can ask for up to 3x your current limit. Computer will counter offer if the 3x isn't auto approved.

Edit to add: You can build a solid score without open installment loans. Your Amex card should be providing your experian fico 08 score every month.

Your citi card shows an equfax score. It's a bank card model fico score.

Adding a dscver or Barclays card will give you transunion Fico 08 score.
Last edited by CuppedUp on Thu Dec 31, 2015 6:32 pm, edited 1 time in total.
Spirit Rider
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Re: How much credit limit is too much?

Post by Spirit Rider »

The short answer is that you can not have too much. If a bank feels that your available credit to income ratio is too high, they will simply ask you to reduce/close some credit lines.

The are interested in controlling their risk, but they will not generally reject you based on this. They will give you an opportunity to meet their underwriting requirements. Unfortunately, it is pretty hard to know what those limits might be ahead of time.

The best thing is to have no month to month credit card debt and have your monthly reportable balances < 10% of your available credit
Topic Author
GrandDesigns
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Re: How much credit limit is too much?

Post by GrandDesigns »

CuppedUp wrote:Definitely don't close the MasterCard just yet. Especially if it has no annual fee.

You don't have to ask for 39k with Amex. You can ask for up to 3x your current limit. Computer will counter offer if the 3x isn't auto approved.
Ok. This thread makes it sound as if I don't lose much by going for the max. Also, if a bank was concerned about total liability, I could just reduce the limits right? Or is it too late then?
Mudpuppy
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Re: How much credit limit is too much?

Post by Mudpuppy »

CuppedUp wrote:Optimal for FICO 08 scores is to have at least 3 open credit card accounts. With a small utilization reported on exactly one card.
Most mortgage companies use the FICO 04 model though. This is annoying, because it's very hard for a consumer to get their FICO 04 score and the FICO 08 score tends to be higher than the FICO 04 score (though not always). So you're only getting a ballpark approximation from pulling your FICO 08 scores.
GrandDesigns wrote:I have the MasterCard I got when I turned 18 (2008) from my local bank with a $1,000 limit. I really want to close the useless card. My AmEx is only 6 months old.
Keep the MasterCard due to its age. Age of accounts matters in both FICO 04 and 08 scoring models.

You might want to search the myFICO forums to see how AmEx reacts to a credit increase request for someone who was given a high initial credit limit before asking for a 3X increase. This post on myFICO forums seems to be pretty comprehensive about AmEx credit limit increase (CLI) requests: http://ficoforums.myfico.com/t5/Credit- ... -p/1811071
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amphora
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Re: How much credit limit is too much?

Post by amphora »

When your credit score is calculated it takes into account credit utilization, which is amount spent divided by available credit. So having a higher credit limit increases the denominator, lowering your credit utilization. If anything I would want a higher credit limit, not worry about it being too high.
CuppedUp
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Re: How much credit limit is too much?

Post by CuppedUp »

Mudpuppy wrote:
CuppedUp wrote:Optimal for FICO 08 scores is to have at least 3 open credit card accounts. With a small utilization reported on exactly one card.
Most mortgage companies use the FICO 04 model though. This is annoying, because it's very hard for a consumer to get their FICO 04 score and the FICO 08 score tends to be higher than the FICO 04 score (though not always). So you're only getting a ballpark approximation from pulling your FICO 08 scores.
For approx 30 bucks you can get the three bureau 08 and 04 scores from the fico website. Along with a slew of other model scores.
cheapedy
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Re: How much credit limit is too much?

Post by cheapedy »

Within 4.5 years of initially establishing credit, Amex gave me $15,000 CL on a new Blue Cash. I was so freaked out, thought it was just 5,000, upon second look, WOW! I then immediately placed it in an "undisclosed location" and has been used only a handful of times since.
Mudpuppy
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Re: How much credit limit is too much?

Post by Mudpuppy »

cheapedy wrote:Within 4.5 years of initially establishing credit, Amex gave me $15,000 CL on a new Blue Cash. I was so freaked out, thought it was just 5,000, upon second look, WOW! I then immediately placed it in an "undisclosed location" and has been used only a handful of times since.
I have never been tempted to just randomly go out and max out my credit cards. I only charge what I have cash to cover when the bill comes around. This doesn't mean I don't make big charges, but my large charges are mostly to get rewards dollars, not because I don't have the cash on hand.

So a large limit for me would mostly elicit a reaction along the lines of "great, this will improve my credit utilization ratio". And the card would stay in my wallet, only to be used when needed.
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goingup
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Re: How much credit limit is too much?

Post by goingup »

I don't think you can have "too much credit". Your credit score is predicated on credit utilization (among other factors). That is credit utilization overall, and credit utilization on each individual card. I have read that it's wise to not exceed 20% utilization on any card.

Having taken out several mortgages I can tell you no bank was ever worried about too much available credit. It looks much better to have the credit extended to you and not use it.
Broken Man 1999
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Re: How much credit limit is too much?

Post by Broken Man 1999 »

As we age, and need little, if any credit, we are bombarded by increases in the lines of credit we are hardly using.

Hopefully I won't lose my mind, get cash advances on all the cards, and have a big blowout in Vegas!

Seems credit limits are inversely proportional to your need for credit.

I shouldn't complain, I've never been a slave to the card companies, and for that I am thankful!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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