IS there such a thing as TOO MUCH credit availability?

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Replied by FrankN on topic Focus on Utilization Rate

Thanks JGIBBS. I am all moved in and settled. The bank I used didn't want me to open any account prior to close was more because that could be debt used in front of their mortgage payments and had already performed an analysis on me. Afterward, they don't really care and honestly can't do anything about it.
2 years 3 weeks ago #1

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Replied by JGibbs on topic Focus on Utilization Rate

FrankN wrote: I am closing on a house this month, and the bank I am using specifically asked me to not open any accounts from when I was approved to close. If I do, they said it could cancel their approval!

Congratulations! I hope you've moved in and gotten everything unpacked and settled.

I've also been told that having too much credit available affected your FICO score because there was a possibility that you could run up a large debt in the future and not be able to meet your future payments. Maybe it depends on what type of loan/mortgage you're seeking? Or I was just told incorrectly by the car dealership.
2 years 4 weeks ago #2

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Replied by FrankN on topic Yes there is, of course.

Pinky wrote: The credit bureaus look to see how much credit you have in relation to your income and assets. Add up total recurring debt, divide with your gross income to get your ration. Most mortgage companies will only loan if you have a ratio of less than 43%.


Thats right and each mortgage company/bank calculate it a little differently. Some may be more aggressive while others may be more conservative.
2 years 4 weeks ago #3

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Replied by Pinky on topic Yes there is, of course.

The credit bureaus look to see how much credit you have in relation to your income and assets. Add up total recurring debt, divide with your gross income to get your ration. Most mortgage companies will only loan if you have a ratio of less than 43%.
2 years 4 weeks ago #4

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Replied by FrankN on topic Focus on Utilization Rate

I am closing on a house this month, and the bank I am using specifically asked me to not open any accounts from when I was approved to close. If I do, they said it could cancel their approval!
2 years 4 months ago #5

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Replied by Wanderer on topic Focus on Utilization Rate

As a follow ... mortgage lenders do not like to see new credit generally within six months of a mortgage application (note this isn't a deal killer but the borrower will be asked to write an explanation of the new credit and then the lender will consider the responses). As to closing accounts, accounts in good standing generally will remain on your credit reports for ten years ... that said at the end of the ten years they drop off and your Average Age of Accounts and Oldest Accounts will potentially be affected. With a mortgage in mind ... let sleeping dogs lay until after the mortgage is closed!
2 years 5 months ago #6

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Replied by FrankN on topic Focus on Utilization Rate

Different banks use all different kinds of metrics & analyses to assess if you should get a loan from them, but don't be scared about your credit availability. Utilization, income levels, debt levels are much much much more important. Those are the things you should look at when trying to get a mortgage/loan.
2 years 5 months ago #7

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Replied by Tishbel on topic Focus on Utilization Rate

We were told this by a bank, ignored them, and got the mortgage from a bank that didn't make that request. Some of my cards had been open and unused for nearly twenty years, but taking them off would have left several large gaps on my credit record. If you're worried about too much credit, you can phone the card issuer and ask them to reduce your limit, which I've done once when a credit limit increase brought me into an annual fee paying tier. As long as your score is good and shows responsible spending, I don't think most issuers care.
2 years 6 months ago #8

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Replied by FrankN on topic Focus on Utilization Rate

That is not true and the mortgage broker is misinformed. It should not affect your chances to get a mortgage in anyway.
3 years 4 months ago #9

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Replied by patse on topic Focus on Utilization Rate

FrankN wrote: Closing accounts can hurt your credit score because it lowers your credit history timeline once those accounts don't show up on your credit score. It could appear you don't have a long credit history when in fact you may.


I have been told that you need to watch how much available credit you have. Is this wrong? I wonder why mortgage brokers tell people this. I have never had a lot of available credit.
3 years 4 months ago #10

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Replied by FrankN on topic Focus on Utilization Rate

Closing accounts can hurt your credit score because it lowers your credit history timeline once those accounts don't show up on your credit score. It could appear you don't have a long credit history when in fact you may.
3 years 4 months ago #11

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Replied by FrugalFran on topic That's shocking.

Egghead wrote: If you can't trust the 'expert' advice of a banker what hope is there?


This is how I feel right now. We're looking at getting a land loan or a mortgage next year and I can't get a straight answer about what the right thing is to do with our credit cards. At this point, I've thrown my hands up and decided to keep all of them with a low utilization rate.
3 years 5 months ago #12

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Replied by Breakinger on topic Focus on Utilization Rate

I've wondered this as well. I want to start paying up some of my debt from credit cards and the one store card that I have, but I wasn't sure if closing out the accounts are a good idea or not. I have a 710 credit score and would like to get rid of at least two of those accounts. Will this hurt my credit limit in the long run?
3 years 5 months ago #13

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Replied by FrankN on topic Focus on Utilization Rate

I completely disagree with the banker's logic as long as you have a utilization rate of 10% to 30%. If you are only able to use <10% of your utilization, then reducing your credit limit may be okay however it won't HURT your credit score. I believe the banker was missing the point. You shouldn't focus on credit limit per say, but your utilization rate (amount used / amount available). From everything I have read, your goal should be to have a utilization rate of 10% to 30%. In theory, you would have a higher score over time if you have a slightly higher utilization rate (say 25%) vs. a 1 to 2% utilization rate, holding everything else constant. Credit card companies want you to use your credit card, if you use it correctly, overtime your credit score should reflect that use.
3 years 7 months ago #14

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Replied by Egghead on topic That makes sense.

Half the work in building a good credit score involves showing that you can actually manage your spending responsibly. The reality for some people though is that whatever their limit they'll spend up to it.
3 years 8 months ago #15

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