I have a high credit limit on my credit card (30,000 - 40,000). Does anyone know if this in any way will affect how much money I would be able to get a loan for a property/car if I always kept the balance at 0. Basically i want to know if having a high credit limit would reduce the amount of money I could borrow in the event i wanted to take a loan out.
It could. Some lenders look at the over all amount of credit that is available to you at the time you apply for the loan. Some may consider, if your available credit card amount is $30 000 then if you ran out and racked it up tomorrow that would mean you would have a min interest payment on the whole amount of $30 000.
Cal up your bank and ask them
That is an unlikely situation however. But I’m sure with today tight credit scrutinizing, it’s possible.
I think it depends on how you use that credit limit. If you don’t use it often and the balance is low, that should be o. k. You have to demonstrate responsible use of credit.
A high credit limit with low utilization (<35%) generally helps with your FICO score which is important to lenders. If a specific lender is truly concerned that you might go out and max the CC limit the day after closing their loan and this would adversely impact your ability to repay the loan they might ask you to reduce the limit or close the account. As previously mentioned this is unlikely.
Just asked my commercial banker about this the other day. I have a card w/ a 15k limit and $0 balance. I asked it they would look negatively upon me because I have that much open credit and he said at 15k it would not be a problem, however, if the levels got up to 30,40,50k of open credit that could be looked upon negatively.
We investors need to understand that the banks operate under a “the sky is falling” attitude. So if you have 30-50k of open credit, any lender would certainly consider the fact that you could incur that debt making it much more difficult to make your mortgage payments. I think it’s only fair of them to consider this scenario.
From everything I have read and been told the previous post is dead on. FICO likes to see you use 25-35% of available credit, so you might think about doing that just to boost your score. Go buy yourself something nice for 10k (30%) and enjoy it. :beer
Thanks everyone for your help.
I wouldn’t close that account. It is boosting your credit score. Better credit score means better loans, so at a minimim it balances out, and more than likely it is doing you a lot more good than harm.
FICO has stated numberous times that closing a revolving credit account can never help your score, but it can hurt it.