Does having too much credit give you a low score?

[Mike71]

I was just curious about this. Not including my car and my condo I have about 55,000 in available credit with various lines of credit,credit cards,store cards, etc. I am only using about 10% of that credit right now, so nothing is maxed out or even close to it. Does just having that much credit hurt my credit report and FICO score? I don't want to be denied when I decide to apply for something I really need cause I have too much credit. Anyone work for Equifax or Transunion or have some related experience and can offer an opinion?

[mark_in_2k]

Yeah, I believe when you have a lot of $$$ in credit available it starts to count against you as you can theoretically go out one day and spend all your $55,000 in one outing. I guess that could be very tempting to some people :twisted:

Doing this would obviously increase your monthly expenses as you try to pay back all those bills.

If you're having some problems with your credit ratings as a result of having store cards, just cancel them. If you ever need them again, just sign up again. FS and BB just do it in-store anyway!

[rdarkman68]

Yeah, I believe when you have a lot of $$$ in credit available it starts to count against you as you can theoretically go out one day and spend all your $55,000 in one outing. I guess that could be very tempting to some people :twisted:

Doing this would obviously increase your monthly expenses as you try to pay back all those bills.

If you're having some problems with your credit ratings as a result of having store cards, just cancel them. If you ever need them again, just sign up again. FS and BB just do it in-store anyway!

No, lots of credit does not make you a bad borrower. Your current assets are factor, but generally the person that can borrow the most and repay all he borrowed has the best credit (at least repay each due payment on time). People that has no credit history (say never have a credit card) is no better than a person with bad credit. Because I can't be sure how well you are at repaying debt, that's the most important question the bank wants to know. It has nothing to do with what $$$ you have in credit. Its true I can spend all my credit today, but I can also show the bank I have not spend all my credit $$$ for these many years... does that make me a better person?

[Carnage]

No, lots of credit does not make you a bad borrower. Your current assets are factor, but generally the person that can borrow the most and repay all he borrowed has the best credit (at least repay each due payment on time). People that has no credit history (say never have a credit card) is no better than a person with bad credit. Because I can't be sure how well you are at repaying debt, that's the most important question the bank wants to know. It has nothing to do with what $$$ you have in credit. Its true I can spend all my credit today, but I can also show the bank I have not spend all my credit $$$ for these many years... does that make me a better person?

That's true and all.

But when it comes down to applying for something, then yes the amount of credit has an affect.

For instance if he tries to get a new credit card, they might see how much credit he has, and deny him the card just because of that.

[synaptech]

Yeah they factor "revolving" credit. For example, if you apply for a mortgage and you have, say 2 credit cards with 10k limits each, well even if you have no balance on the CCs they still use the 20k to factor your debt ratio. After learning this I cancelled all my extra cards (ie bay, home depot, future shop, etc.) and called my CC company to lower my limit. It was explained to me that even though I am not using it, and my credit history is good, I could walk out tomorrow and max them all out.

[sslinn]

Someone mislead you there. You only have to debt service 3% of the balance of your credit cards for a mortgage. Zero balances mean the credit cards don't even come into the equation.

[Corvillus]

Short answer, no. Having too much credit doesn't hurt SCORE. In fact, as long as the average age is reasonable and all other things (including total debt amount) constant, it increases it.

That said, score isn't everything. You can have an 800+ FICO and still be turned down for a mortgage.

[tng11]

Believe it or not, mortgage is one of the few products where score really doesn't matter once it's over a certain number. Mortgage underwriters don't really look at scores, they look mostly at your income, cash flow, debt service ratios. Having a 830 FICO won't matter if you have too much available credit but don't have the income to service the trade lines. All your credit limits are totaled up as potential liabilities (you could go out tomorrow and max everything out after they give you the mortgage).

[Jacklad]

Believe it or not, mortgage is one of the few products where score really doesn't matter once it's over a certain number. Mortgage underwriters don't really look at scores, they look mostly at your income, cash flow, debt service ratios. Having a 830 FICO won't matter if you have too much available credit but don't have the income to service the trade lines. All your credit limits are totaled up as potential liabilities (you could go out tomorrow and max everything out after they give you the mortgage).

The worst case scenario in that case is that they would ask you to close some unused lines. No big deal if you're not using it anyway.

But, from personal experience, that's rare once you have a long history. When we got a mortgage for our rental property we had the ability to go ~$225,000 into unsecured debt over all our lines (joint and separate). Nobody batted an eye, nor were we asked to close anything. In fact, they threw a $50k LOC into the bargain - so now, theoretically, we could now go $275k into debt. I suppose a 20+ year credit history shows them that it's relatively unlikely.

[EugW]

The worst case scenario in that case is that they would ask you to close some unused lines. No big deal if you're not using it anyway.

But, from personal experience, that's rare once you have a long history. When we got a mortgage for our rental property we had the ability to go ~$225,000 into unsecured debt over all our lines (joint and separate). Nobody batted an eye, nor were we asked to close anything. In fact, they threw a $50k LOC into the bargain - so now, theoretically, we could now go $275k into debt. I suppose a 20+ year credit history shows them that it's relatively unlikely.
If you are a top tier credit risk these things usually don't matter. The people who have more problems are those without as lengthy and spotless credit record.

However, if you don't need 6 digit $ worth of credit cards, then why bother anyways? I just got a MBNA credit card. They gave me over 3X the amount I wanted. I said no, so they reduced it to what I asked... which is still about 4-5X as much as I need for that card. (I chose that amount to keep ratios low.) Do I really need 15X my normal usage on a single card? (And that's not even counting my other cards.)

[tng11]

The worst case scenario in that case is that they would ask you to close some unused lines. No big deal if you're not using it anyway.

But, from personal experience, that's rare once you have a long history. When we got a mortgage for our rental property we had the ability to go ~$225,000 into unsecured debt over all our lines (joint and separate). Nobody batted an eye, nor were we asked to close anything. In fact, they threw a $50k LOC into the bargain - so now, theoretically, we could now go $275k into debt. I suppose a 20+ year credit history shows them that it's relatively unlikely.
Working in a financial institution, I find it's mostly a problem for younger people who have had credit for only 5-6 years and they're seeking a mortgage. Their income is borderline for approval and even if their score is good, they may be asked to lower limits as they haven't really proved long enough they can handle $XX,XXX in debt.

If your credit file is long enough, then banks won't care about the dollar value of your lines as you have proved a track record of being able to handle $XXX,XXX debt for many years. The only concern could be if they see you opened a lot of new lines recently with huge limits. When my parents went to get a HELOC (which is basically a mortgage), combined they had more than double what you have in unsecured lines and the bank didn't ask them to close or lower anything. They also threw another unsecured LOC on top of the pile, giving them almost a million dollars in extra potential debt.

Getting a few hundred thousand in unsecured debt isn't too hard. A few $30K credit cards and LOCs as well as a $50K LOC will easily bring you there. But if banks grant you limits like these you are the most prime credit risk there is.

EDIT: And to answer the OPs question, I'll provide some anecdotal evidence. My mom has more than $160K in available credit to her and her FICO is 810 so the dollar value doesn't matter, it's the % you use that affects your score.

[Jucius Maximus]

Credit is really an "I Love Debt" score. Having lots of credit and low utilization will help your score. However if a lot of it is newer credit that you got recently, your average age of accounts will be low, so that will hurt your score.

Also, if you are applying for a mortgage, having a lot of unused credit can hurt you because it looks like you are an accident waiting to happen. (Mortgage lenders want you to NOT love debt, so you are more likely to pay it off and not blow money on credit cards and stuff.)

[f00kie]

If you are a top tier credit risk these things usually don't matter. The people who have more problems are those without as lengthy and spotless credit record.

However, if you don't need 6 digit $ worth of credit cards, then why bother anyways? I just got a MBNA credit card. They gave me over 3X the amount I wanted. I said no, so they reduced it to what I asked... which is still about 4-5X as much as I need for that card. (I chose that amount to keep ratios low.) Do I really need 15X my normal usage on a single card? (And that's not even counting my other cards.)

From what I've read, your FICO score gets maxed when your total utilization is at 1% and you are only utilizing 1 of your revolving credit cards. In that sense, having the higher limit helps a lot.

On the other hand, credit score does not equal to what lenders want all the time, as others have mentioned. Having read up on the myFICO forums last weekend, some of the things that give you a greater credit score are counterintuitive and are not exactly what lenders look for.

In any case, from a FICO perspective, your credit limits are not factored into the equation, from what I've read; only your utilization.

[f00kie]

Is the average age weighted by credit available, or just a straight average over all accounts?

In order words, is it better to have a 5-year old VISA with a limit of $20,000 and a brand new LoC with a limit of $5,000, rather than the other way around?

I think its straight through. However, it does include closed accounts (until they fall off the credit report).

[Jucius Maximus]

Is the average age weighted by credit available, or just a straight average over all accounts?

In order words, is it better to have a 5-year old VISA with a limit of $20,000 and a brand new LoC with a limit of $5,000, rather than the other way around?

Not sure on that. But if I had to guess, I'd speculate that it's not weighted.

[jmc0]

"Does just having that much credit hurt my credit report and FICO score?"
No
But 'will having too much credit cause you to be denied'
Maybe, it'll depend on the situation.

Getting a few hundred thousand in unsecured debt isn't too hard. A few $30K credit cards and LOCs as well as a $50K LOC will easily bring you there. But if banks grant you limits like these you are the most prime credit risk there is.
Would love to get 300k+ unsecLOC, but it's not that easy. For the many people starting fresh today, they'll have problem going from 0 credit into 150k unsec in today's enjoinment.

One thing I notice, bank might give 300k unsec to a professional student applying. But if that same person didn't apply until after graduation (and working), the bank likely won't give her that amount.

edit update answer:
I thought those unsecured LOCs magically transformed into loans after graduation.
It depends on the financial institution. The professional student I talked to said their's remained a ploc, but she ‘only’ got 150k with special consideration for more. But I know many newly working graduate from these same professional program [whom are debt free with excellent credit], that can’t even get 75k unsecLoc because they apply too late (i.e. no longer students). One would think working professionals are more credit worthy than students, but of course financial institution have their own way of calculating/giving these thing...

[bubble.tea]

...Doing this would ...
Make you an Americain. LOLz. I'm always amazed to hear of people on that financial judy (whatever her name is) show saying they have $125K in Debt. WHO THE HECK accumulates that much debt? Does it REALLY take a genius to figure out that you're not supposed to live 'on credit'? :ROLLEYES:. SERIOUSLY.

Can someone tell me my fico scrore for freeeeeeeeeeee?

[gizmo8]

That's true and all.

But when it comes down to applying for something, then yes the amount of credit has an affect.

For instance if he tries to get a new credit card, they might see how much credit he has, and deny him the card just because of that.

the more you apply for credit the lower the FICO score.I canceled all my cards except two.Thats all I need.If you do cancel your card they will ask you why,tell them you dont use it that much,DO NOT tell them you cannot afford having it.

[f00kie]

the more you apply for credit the lower the FICO score.I canceled all my cards except two.Thats all I need.If you do cancel your card they will ask you why,tell them you dont use it that much,DO NOT tell them you cannot afford having it.

While cancelling the card itself does not lower your FICO score, it most likely lowered yours, and in the long term, will definitely lower your score. The general consensus is that unless the cards cost you an annual fee, don't cancel them.

The two ways it reduces your score are: lowers your utilization, and, after it falls of your credit report in 6-7 years, it will lower your average age of accounts.

[pshch]

While cancelling the card itself does not lower your FICO score, it most likely lowered yours, and in the long term, will definitely lower your score. The general consensus is that unless the cards cost you an annual fee, don't cancel them.

The two ways it reduces your score are: lowers your utilization, and, after it falls of your credit report in 6-7 years, it will lower your average age of accounts.

Actually it raises your utilization because debt remains the same but total credit is reduced so ratio goes up.
Also it will lower average age of accounts only if closed card is old.

Taking into account identity theft I would keep number of cards manageable (which may be 2 for one person and 20 for another) which means one can check all of them at least once a month.

[f00kie]

Actually it raises your utilization because debt remains the same but total credit is reduced so ratio goes up.

Oops, that's what I meant.

[EugW]

Taking into account identity theft I would keep number of cards manageable (which may be 2 for one person and 20 for another) which means one can check all of them at least once a month.
That's exactly why I close my unused accounts. I keep enough credit around to keep my credit utilization ratio quite low, but see it as a potential trouble spot to have so many accounts that I might forget about one or two.

Plus, sometimes stupid things happen that you can't foresee. For example, I emptied my ICICI HiSAVE account last year but didn't close it right away. Then, a month later, ICICI charged me 1 cent (http://www.redflagdeals.com/forums/showthread.php?p=8740143#post8740143) because it felt it had overpaid me 1 cent in interest. :rolleyes: Thus, I've technically been overdrawn by 1 cent for 5 months, through no fault of my own. (I wonder how much this will affect my credit score, if at all.) Even worse, I can't even close the account now because I'm overdrawn, yet they won't accept a 1 cent (or even 1 dollar) deposit from me because the amount is too small.

[Jacklad]

Plus, sometimes stupid things happen that you can't foresee. For example, I emptied my ICICI HiSAVE account last year but didn't close it right away. Then, a month later, ICICI charged me 1 cent (http://www.redflagdeals.com/forums/showthread.php?p=8740143#post8740143) because it felt it had overpaid me 1 cent in interest. :rolleyes: Thus, I've technically been overdrawn by 1 cent for 5 months, through no fault of my own. (I wonder how much this will affect my credit score, if at all.) Even worse, I can't even close the account now because I'm overdrawn, yet they won't accept a 1 cent (or even 1 dollar) deposit from me because the amount is too small.

So, deposit $19.99 and withdraw $20.

And it won't affect your credit score - bank accounts only get reported if there is a negative balance that goes to the collection stage.

[tng11]

So, deposit $19.99 and withdraw $20.

And it won't affect your credit score - bank accounts only get reported if there is a negative balance that goes to the collection stage.

You mean, deposit $20.01 and withdraw $20, no?

[EugW]

You mean, deposit $20.01 and withdraw $20, no?
Not sure, but it might be as high as $100.01 (and withdraw $100). It's not the money, it's the principle of the thing, and the fact that I've run into so many problems with their online banking system that I'm not keen on handing them any more money. I will probably be forced to do that though, which means they hold my 100 bux hostage for a week before it clears, assuming they don't screw up things yet again.


And it won't affect your credit score - bank accounts only get reported if there is a negative balance that goes to the collection stage.
Good to know. Thx.

[Jacklad]

You mean, deposit $20.01 and withdraw $20, no?

That's exactly what I meant. :o

Pesky negative numbers.:lol: