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| Wed, 01-21-2009 - 11:05pm |
I called yesterday to 2 of my credit cards to reduce the limits. I reduced one from $15800 to $3000 and the other from $6000 to $4000. There is no balance on the first one. The second one I charge and pay off monthly, but usually only has up to $1000 on it. I wanted to decrease my LOC. It's $10000, and currently does not have anything on it. i don't want to get rid of it completely. The interest is about 7%, and I would like to keep it for emergencies, at least until I get my emergency fund built up (hopefully some time next year). The representative at the bank said if I lower my limit, they may increase my interest rate. So my questions are:
1. Has this ever happened to anybody? If I call and ask them not to increase my interest rate, do I stand a chance?
2. How do you know if you have too much available credit? I don't have balances on them, but I don't want to have too much credit open either. We are renewing our mortgage in September, and we are hoping for a great rate!
Thanks
Tara


I ask the
Hi Mary Ann,
First, absolutely no offence taken. I have decided to leave the LOC alone for now. As for your suggestion about calling the credit card and raising it up, I am still comfortable with where it is, so I am not opting to do that (although I can see the point that you made). I opened that card to transfer my line of credit balance to it to get the introductory 0%. I was really uneasy about adding that credit card in the first place. So, for me this is a good option.
I was blown away by your information about having 100% to 200% of your gross income in available credit. I just could not live with that much available credit. For us that would be up to $240,000. I just could not rest peacefully having that credit available to me. I'm not sure why, it would really bother me. I totally understand that you are not indicating that you have that much debt, but still that much possible credit does not sit with me.
As for lowering the balance on the little credit card that I use for most purchases. I didn't think about the 25% thing. But in the end I think it is good for me. I am really starting to wrap my head around not using the credit cards. So this forces me to use it less, working towards my goal of cash only.
Your suggestion about someday regretting not having the purchasing power. I totally agree with you. Something could happen, and I may really wish that I had more available credit. And, down the road if something bad does happen, I will need to face that. But, for now, this is what DH and I are comfortable with. Finances are so complicated and over whelming. I find it so hard to deal with what is happening right now vs planning for the future. So, with the credit cards, we have decided to only concentrate on right now. We will continue to concentrate on our future with investments and savings.
Thank-you so much for your advice. You offer so much on this board.
Tara
Hello, I have been lurking but must add I won't worry too much if I were you. There are many more factors to qualifying for a mortgage (and a decent interest rate to go with it) than the limit of your credit cards. I have only three credit cards (one Visa, one American Express with a limit, and a second American Express with no preset limit), no charge card of any sort, and the total available credit is not quite 50% of my gross annual income. A few years ago I had no trouble at all getting a mortgage equivalent to 5 1/2 times my gross annual income at that time at a fixed rate of 5.125% for 30 years. (The ratio has since changed. I received several raises, and paid down the mortgage, so these days what I owe is approximately 1 1/2 times my gross annual income).
If you are comfortable with your current credit limit and manage other aspects of your finances wisely, and down the road if you need more, most likely it will be available.
Hi Marie,
Thanks so much for your reassurances. I am not worried. This will be our third time getting a mortgage. Right now we are just finishing off a 5 year fixed at 4.90% We are in a better financial position now than we were then (much better!).
However, I am glad that I posted about this. I was planning to decrease a few more limits, and now I will hold off.
Thanks all
Tara
Hi Tara,
Factors for determining excellent credit are fluctuating daily!
Wow, 100-200% of your gross income in credit?
Kate
Actually the exact opposite is true. Your credit score goes UP when you have available UNUSED credit. That tells the mortgage company that if you have an emergency, you have a place to go for money and will continue to pay the mortgage.
It is not a good thing at all to lower the limits if your intent is to rework a mortgage.
It is great to do that if you are trying to eliminate all debt and don't care about your credit scores.
Marie
Edited 1/26/2009 10:29 pm ET by skibunyns
Although, Marie, you are right about companies and creditors looking for unused credit, Kate (smallchange) is right about the numbers:
25-35% credit use is considered ideal for your FICO score. Remember, this does not necessarily mean 25-35% in consumer debt, literally. Just having that percentage on your statement looks like debt, even if it under control.
Good points.
I do know my score dropped hard a couple years ago when I closed and lowered some cards.