Lowering Credit Card Limit?

rivkadrSeptember 13, 2008

My credit score is a bit lower than I would like it to be, and I'm trying to find ways to raise it (we're hoping to refinance our mortgage sometime in the next year, and we're going to need the best score possible, I imagine).

I have one credit card that has a pretty high credit limit on it -- something like $50,000 on it. They keep raising the limit on it without my asking them to. If I call them and ask them to lower it to something like $15k, will that have any affect on my credit score?

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western_pa_luann

Yes, it will likely lower your score short term.

    Bookmark   September 13, 2008 at 12:42PM
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Chemocurl zn5b/6a Indiana

I would think that it would have a negative effect. It would make what you owe, a larger proportion of your 'available' credit. I know there is a name for that ratio, but it escapes me now.

It's better to owe 5K on a $50K card than what it would be to owe 5K on a 5K or 10K card.

Sue

    Bookmark   September 13, 2008 at 12:58PM
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rivkadr

Ah, okay. I thought it was bad to have a lot of available credit -- that it affected your credit score negatively, because the credit companies figured if you have that much possible credit available to you, you might use it.

I generally only use about $200 - $500 of credit each month, and I almost never carry a balance (unless I buy something really big that requires a couple of months to pay off).

    Bookmark   September 13, 2008 at 1:48PM
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cathie54

The way it 'WAS'- a year or so ago (being a bit sarcastic):

AVAILABLE CREDIT to DEBT RATIO s/b about 20% or less.

SO...If you have a $1000.00 'LINE OF CREDIT' on a credit card, and you have $200.00 BALANCE OWED on that CC, you are at:
20% DEBT to AVAILABLE CREDIT

Which, should be OK.

(I have read that 25% is OK, but I don't know whether to believe it or not)

That being said, I noticed on my credit report from early 2007 - that I had TOO MUCH credit. (..another thing I need to take care of...)

Do the math: Your Avail credit x (times) outstanding balance (amount owed)...to get your 20% or lower. (the lower, the better!)

    Bookmark   September 18, 2008 at 2:02AM
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cathie54

Oops, I GOOFED on the MATH!!! Pfft! STUPID ME!

There are a few ways to figure it.

Take your AVAIL CREDIT x (times) 20%...the outcome would be the maximum $$$ amt you should owe on your credit card.

SO: IF you have a 'LINE OF CREDIT' of $50,000.00:
50,000. x 20% = $10,000.

Which means you can have $10,000 in debt (OWED) on your credit card, and still be at the 20% level...for THAT.

IF you ONLY have MAXIMUM of $500.00 at any given time, you can get away with lowering your credit limt to $2,500.00 & still be in the 20%. (500.00 / (divided by) 20% - OR... 500.00 divided by .2

I would 'think' you could ask them to REDUCE your 'Line of Credit' down from about $50,000 to about $10,000.

At a $10,000 line of credit, you can have DEBT (outstanding balance) of $2,000, and still be AT the 20% of "Availible Credit to Debt Ratio"....that is, before any finance charges are added on.

Well, that was how it WAS...a year or so ago anyway.

AND, I hope I have my math correct this time! LOL!!!

    Bookmark   September 18, 2008 at 3:03AM
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joyfulguy

Ordinarily you use about $500.00 or so ... does that apply to vacation? Other travel? Christmas? Other potential emergencies (e.g. major repair job on car)?

ole joyful

    Bookmark   September 21, 2008 at 6:23PM
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rivkadr

If you read what I wrote, I did say that there are special circumstances sometimes where I do put more money on the credit card. But the average month, I don't put more than $500 on it. There may be 2 - 3 times a year that require larger expenditures, such as vacation or a special purchase, such as a computer, or a bed, or whatever. I pay those off as quickly as possible.

    Bookmark   September 22, 2008 at 12:12PM
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cathie54

Only YOU know how you MAY use your credit cards, and to what extent.

Your question is how to improve your credit score.

With a credit line of (about) $50,000, you can have $10,000 debt (outstanding balance owed on your credit card), and be at the 20% mark.

If your credit line is at $30,000, you have max of $6,000 to be in debt (CHARGED/OWED/OUTSTANDING) on your credit card, and still be at the 20% "DEBT TO AVAILABLE CREDIT RATIO".

IF your AVERAGE is 'about or less than' $300.00-$500.00 outstanding balance (debt), but 'MAYBE MORE DEPENDING'...

...well, it's that "maybe, depending" that you need to account for.

I've given you the details/formulas/TOOLS to do the math.

Only YOU know what you may or may not charge in future, so you must take a realistic look/approach to that. (Be honest with yourself - TOTALLY HONEST!)

The way things are going recently? I would stive for no more than 15% or even 10% 'DEBT to avail credit'. (Or less...less is always better)

Please come back - let us know what you decided to do to get HIGHER CREDIT SCORES.

BTW - WILL take a couple or FEW months to reflect on your credit report IF you decide to request lower credit line. So, I guess that's why 'they say' to start planning "well in advance".

(YUP! Amongst everything else important, I have some clean-up to do myself!)

    Bookmark   September 24, 2008 at 7:15AM
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cathie54

Of course, there are other variables also.

If you only earn, say $8,000.00 per year, but have CC with - say $30k-$50k avail - AND...have about $6k OWED...

Ummm...that might be a problem.

...and then, there is also the question of how many other CC's you own...status of each.
AND: What 'other' loans (debts) you have (Auto loans, student loans, personal loans...etc)

-----------------------
The 'idea' - as it WAS...(I think), do NOT close out any of your CC's! They provide a "history"...the longer the (good) history, the better. (Meaning, hold on to those old ones if you have any, even if you haven't used/don't plan on using them for a long time.

"OLD SCHOOL" was to cancel any and all you do not use. (I did cancel several of mine - many years ago - PRE-INTERNET!)

"NEW SCHOOL": Do NOT cancel. Keep them. They provide a "history".

Tomorrow? Anybody's guess what today or tomaoorw will bring! The Financial mkts going poop daily...

    Bookmark   September 24, 2008 at 9:22AM
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GawdinFever

For optimum points on your fico scores...you should only let between 1-9% report.

    Bookmark   October 21, 2008 at 9:36PM
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