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

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

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.