My New Credit Limit Scares the Bejeezus Out of Me
Posted on June 26, 2007 by Her and tagged credit
Today I got a notice from one of my credit card companies that they have raised my credit limit to over $16,000. This is the first time I have had a credit limit cross the five-figure line. We currently carry zero credit card debt, which is probably why they felt the need to "tempt" me with enough credit to charge a car. I didn't request the increase, and have no plans to use it. Still, it is a 1% rewards card and this could be an option for a large purchase someday. We never want to carry credit card debt again, so it would only make sense for us to save up money first and then pay it off right away.
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NP | Jun 26, 2007
Actually, large credit lines can help your FICO score significantly, because part of the equation is the % of the credit line that you spend (last balance figure is always there even if you pay off every month), and low utilization is good for your credit score. It does not hurt in buying a house, that's just one of the myths out there. I would never cut my credit lines voluntarily, on the contrary, seeing other lenders giving 5-digit lines to you will help others to approve you for other types of credit. Now, spending it wisely is another matter.
Michael | Jun 26, 2007
I've generally stopped paying attention to my credit limits on cards that I use for everyday spending, since I know that I will never use anywhere close to maximum (unless playing the 0% arbitrage game). I've never carried a interest-bearing balance on a credit card, and I've been getting those notifications that my limit has been raised pretty regularly for as long as I can remember.
Jessica | Jun 26, 2007
We regularly ask for credit limit increase just to increase our debt to credit utilization ratio, that a previous post mentioned. That helps your credit score, not the other way around.
Plus, we can make bigger purchases with them to get the cash back (like you, we only make purchases that we can pay off at the end of the month). Smile, this is a good thing!
I've got to agree more with NP - as long as your limits are high and your usage or non-existent I believe you should be OK. If you don't trust yourself with your limit then lower it though.
When I began paying down my debt on my oldest CC they bumped up my limit to around 10K - then when I transferred the balance over to a lower % card, they almost doubled it.
It is a semi-good, semi-frightening feeling though to go to a car dealer and be able to say " I could put that on my card if wanted to..."
Anonymous | Jun 26, 2007
Actually, many stores/dealerships won't allow you to put such big items on your card anyway, because they have to pay a percentage in interest to the credit card company. I have a 30,000 credit line and would LOVE to put my law school tuition on my credit card each year only to pay it off immediately with my loans/savings (I'd make about $600 a year!) but my law school won't allow it. When my husband and I bought a car earlier this year, the dealership only let us put $4000 of it on the card. But it is nice to have that amount of credit to use for our necessary big ticket items whenever we can!
athensoh | Jun 26, 2007
I once charged $14K to purchase a car on a 0% interst and 1% reward card. The dealership was ok - must have wanted to get rid of the car badly :)
triple-e | Jun 27, 2007
I too have tried to charge a car, only to be limited to $2000 of the purchase. I sometimes wonder what might have happened if we had walked away at that point, as if we could only pay for it with the charge card. Saying we only have $5000 in the bank right now, and we were counting on using this card...
JJ | Jun 27, 2007
I put a $20,000 car on my discover card with no problems. Maybe it's at the dealer's discretion.
That is their trick. They want you to spend more. Don't do it. You see how long it take you to get out of debt. Do not go on that road again. Stay focus and do not let the increase tempt you.
Jack | Jun 30, 2007
As time goes by, you may find that you have a job or business that requires you to be on the road for a week or two, and you may need to charge $8 or 10 K. For this reason, and because of the FICO score, the more credit the better.
Just because you have the available credit doesn't mean that you have to SPEND it. Two of the biggest factors (besides delinquencies) in FICO determination are % utilization and age of credit lines. So, keeping what you have available will keep your FICO score up assuming that you don't give in to the temptation to spend it all. If you can't handle that, put the card in a bowl of water and put it in the freezer.
The good thing is that it's a 1% rewards card. If you have the discipline to pay off your credit card and keep $0 balance, maybe you want to think about using it to pay for your everyday items?
Jess | Jun 26, 2007
Remember one of the things FICO looks at when you're financing a house (or a car, for that matter) is how much available credit you have, under the assumption that you COULD max out cards. Sometimes having that high of a limit can be detrimental...if you decide you don't need that much the credit card company is required to lower your limit at your request. I dropped one of mine from $15k to $7,500 for that exact reason and asked them not to raise it again without my express request.
PS: Congrats on paying off the cards!! What a great accomplishment!
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