Too much credit??

[rszdtrvl]

We are refinancing our house and got our credit reports in the mail.

Our numbers are good, but they said we have "too much" credit (in more words than that).

We are in the process of paying off our car loan and the one credit card that has a balance.

I cancelled my JCPenney card, which has a limit of $2100, and a zero balance.

DH's credit card has a limit of $6000, and a zero balance.

The car loan we owe $2700 on.

My credit card we owe $4000 (I believe - somewhere in that area) on. Limit is $7000.

And we have a credit card from the bank that we got when we had to get a new roof put on that has a $10000 limit - zero balance.

Should we cancel my credit card and DH's credit card? Will it hurt us if we are in the middle of a refinance?

I cannot believe that they said we have too much credit (but in a way I can see what they mean).

Any advice?

 

[ctinct]

Did it say too much available credit or too much credit used? I swear they just sometimes put something down to justify their quixotic scores. I just got my free credit report. I also bought my FICO scores. Last year it said I had too many high balances. I paid them down. My credit score went up. My credit limits have not changed, but this year under things that might be negatively impacting my credit score it lists (paraphrasing here) "too much available credit". Can't win. Oh, and one of the bureaus does not have my mortgage reporting on it, so the comment there was "too few types of credit." Yet, if it were reporting , my total indebtedness would be greater. The thing is no one really knows exactly how the credit bureaus calculate our scores. There are guidelines and such, like having a low debt ratio, a good mix of credit, the length of credit (so depending on how long you've had the card you closed, it may have hurt more than it helped) but no one knows ther exact formula used, and the credit reporting agencies want to keep it that way. Doesn't seem fair---we don't even know if they are calculating correctly.

 

[lovesmurfs]

It's my understanding that if you have too much in credit line available (i.e. your zero balances), they don't like to see it. You could cancel all of the cards, wait 45-60 days (not sure about the reporting timeline) and reapply.

The philosophy, as I've heard, is that if you have a significant financial incident (loss of job, health issue, etc.) and have need of money for day-to-day expenses, you would resort to the credit lines you have available and quickly become overwhelmed in debt, resulting in a possible default on your home loan.

 

[r&kmommy]

DO NOT cancel all of your credit cards. What are the interest rates on them?

JC Penney was good to cancel. Store credit cards are stupid, unless it's a Sears card for work tools purposes. Their interest rates are too high, and even paying them off monthly doesn't make sense becuase it's $2000 of available credit that's only good at JCP, instead of a visa/mc where you can use anywhere.

I would recommend closing out whichever credit card has higher interest rate - the $10k or $6k ones, and make sure whichever card you keep both you and your husband are on the account and you both have a card (in case of emergency).

It shouldn't hurt you, and as pp said they don't want to see you with almost $20k of open credit in the event of a job loss/injury you may resort to using it for day to day things and get into trouble.

Good luck!!!

 

[ash-n-brensmom]

My bank told us to lower our limits on our cards before we put in for a pre approved mortgage...in their eyes there is nothing stopping you from racking up all that debt once you get your mortgage and then defaulting on either the cards or your mortgage...more of a risk....

 

[DISdreamin']

Honestly, we have tens of thousands in available credit (revolving accounts like Visa, AmEx, etc) and they weren't commented on when we applied for our refi. For the negatives on our FICO scores, we got dinged for everything from too high a revolving balance (ironic since we pay everything off monthly) to having a new account that was too recent (one account by one of us within the past six months), but the total amount of credit didn't make the top ones that are displayed on the report.

I think they have to have something to comment on, no matter how good your score is. I'm sure even someone with a near-perfect score will still have some kind of notation about what brought their score down, so it's not just us.

FWIW, I believe age of accounts/history is a really big deal in determining your FICO score, so if your credit cards are your oldest accounts, I wouldn't close them until you look into it further. If they're newer accounts it might be reasonable to do so. However, if you're carrying a balance of $4K and you close down accounts, you overall % utilization overall will go up. I don't know if that is a problem (not sure if it's overall % util or by each individual card) but I'd sure look into it further before doing anything.

Check over at myfico.com on the community forums - they have some folks who know the FICO game pretty well who can probably give some good advice on how to improve your score, and figure out how to fix whatever the people you're doing the refi through saw as a negative.

 

[minnie1928]

If your numbers are good, then I'd leave things alone. Canceling your cards could hurt more than it helps, putting you in a worse position score wise.

 

[seashoreCM]

Ask them what you should do and also which accounts you should close.

Now you can think about each one before you actually close it or decide not to after all.

 

[Brancaneve]

I love to listen to Clark Howard on the radio, and he always cautions people to NOT cancel their credit cards. Good credit is based on your debt to credit ratio. Ideally, it is best to have no debt, but with a high availability of credit. Too much credit is confusing, however. If you have a good score, I wouldn't worry about it. Keep your current cards, and try not to open up any more cards. Good luck!

 

[Planogirl]

Too much credit is brought up in the FICO scoring and it's supposed to mean that you have too much potential indebtedness in case you decide to run up your credit cards. Figuring out that correct balance is difficult though.

Just remember that FICO (Fair Isaac) is not a part of the credit bureaus. It's an independent company with very complex formulas.

 

[marie1203]

I will just call and lower some of your credit card and not cancel anything. I wouldn't lower it too much.

 

[marie1203]

Honestly, we have tens of thousands in available credit (revolving accounts like Visa, AmEx, etc) and they weren't commented on when we applied for our refi. For the negatives on our FICO scores, we got dinged for everything from too high a revolving balance (ironic since we pay everything off monthly)

Actually even if you pay it every month this could hurt you since the cc only report it once a month. We also pay our balances but we change card every month so if someone is checking they will realize that.

 

[donnajz]

If your numbers are good, then I'd leave things alone. Canceling your cards could hurt more than it helps, putting you in a worse position score wise.

Didn't realize having too much credit (even if not being used) hurts your credit score.

 

[eliza61]

I love to listen to Clark Howard on the radio, and he always cautions people to NOT cancel their credit cards. Good credit is based on your debt to credit ratio. Ideally, it is best to have no debt, but with a high availability of credit. Too much credit is confusing, however. If you have a good score, I wouldn't worry about it. Keep your current cards, and try not to open up any more cards. Good luck!

Too much credit is brought up in the FICO scoring and it's supposed to mean that you have too much potential indebtedness in case you decide to run up your credit cards. Figuring out that correct balance is difficult though.

Just remember that FICO (Fair Isaac) is not a part of the credit bureaus. It's an independent company with very complex formulas.

See that's the dilemma that these reports force people in. First, I totally believe that the system is stacked against the consumer.

Why is it impossible to get a straight answer on how the crunch numbers?
Why is there so much confliction around the best way to raise your score.

Don't get me started on my soapbox about the banking industry.

I'm in the same boat op, I have quite a few open credit lines that are zero balance. Hey, I'm 50, chances are I've developed a history. I'm so sick of trying tofigure out, should I keep open, close, hang upside down. what!!

Luckily for now I really don't foresee a need for me to apply for any large amounts of credit, every once in a while I'll use the available 6 months zero credit on an appliance or some thing like that but that's pretty much it.

I sick of playing the "fico" game.

 

[DISdreamin']

Actually even if you pay it every month this could hurt you since the cc only report it once a month. We also pay our balances but we change card every month so if someone is checking they will realize that.

We only use one card at a time, so in any given month one card will have a balance on our credit report. The other cards are zeros, or extremely close to it (maybe $100 or $150 for a bill on auto-pay). Also, I've often been paying before the closing date/statement date of the primary account as well, so when they report, they report it as zero as well.

Another one I had was "lack of recent installment loan information" - well, I paid off that student loan last year, so I don't intend to make any more payments, but thanks for asking.

The real irony is the three negatives given by Transunion, Equifax and Experian are all different on mine, with the exception of "time since most recent account opening is too short". I think when the reports are generated, they just have to say *something*, and if nothing stands out, depending on how the calculation was done it just picks something. DH did have one of the three (Equifax) give only two comments, though, which was weird.

Honestly, the whole FICO thing is a black box...you really don't know for sure what will help and what will hurt in some cases. Had I known we would be doing the refi, I definitely would have paid down all our accounts to zero or near zero and left them that way, but I didn't know we were going to jump on a refi. OP, good luck figuring out what the right move is, and please keep us posted!

 

[TxRabbit]

Our numbers are good, but they said we have "too much" credit (in more words than that).

If your numbers are good. I wouldn't do a thing. You can't be certain what effect your actions will have. An excellent point brought up by a PP is that the length of your credit history has bearing and when you start closing accounts, you will affect that history.

We have a TON of credit. OMG, if I think and type, we have credit cards from Citibank, another Citibank, Bank of America, another Bank of America, another Bank of America, Chase, Capitol One, and Best Buy. I recently looked into a mortgage refinance and was told our credit scores, DH and I were both 800. There's just no accounting for how they come up with these scores.

 

[sk!mom]

What is an ok score? A good score?

We recently got a HELOC for some home remodeling. We have no debt since we paid off our mortgage several months ago. When we got our FICO scores, the numbers seemed pretty good to me and we had no problem getting a great interest rate but they did list a couple of reasons that it wasn't higher.

 

[TxRabbit]

What is an ok score? A good score?

We recently got a HELOC for some home remodeling. We have no debt since we paid off our mortgage several months ago. When we got our FICO scores, the numbers seemed pretty good to me and we had no problem getting a great interest rate but they did list a couple of reasons that it wasn't higher.

What is considered "good" has recently changed with things that have happened in the mortgage mart. The standards have been raised slightly. The scores range from 300 to 850. In today's market, you really need to be firmly in the 700s to get the best rate. It will depend on the lender, but generally, above 720 is considered excellent. Above 600 is considered good. Below 600 is considered risky.

 

[r&kmommy]

Our credit scores are in the low 800's and my girlfriend said we would be automatically given best interest rates on any loans we'd apply for... 750+ (in her experience) is "awesome", 600-749 is "ok" below 600 is "risky".

 

[sk!mom]

What is considered "good" has recently changed with things that have happened in the mortgage mart. The standards have been raised slightly. The scores range from 300 to 850. In today's market, you really need to be firmly in the 700s to get the best rate. It will depend on the lender, but generally, above 720 is considered excellent. Above 600 is considered good. Below 600 is considered risky.

In that case, I won't worry about making any changes and I'm going to guess that they must just list a couple of things that kept the score from reaching 900-No matter how high it is.