Friday, May 30, 2008

Lowering credit card limits: any point?


I almost lost my Mastercard this week after almost calling Citibank to lower my credit limit. I guess I didn't stuff it back into my wallet securely. Thank goodness Natalie the Traffic Master found it on the floor and got it back to me. I didn't even realize it was lost.

I mentioned this in a thread over at Give Me Back My Five Bucks, and another poster asked why I'd want to lower my limit.

Good question.
I now have three credit cards:

- a MC with about a $9000 limit
- an Air Miles amex with an $8000 limit
- a bank Visa with a $10000 limit

Total: $27-thousand in credit, plus a bank line of credit.

I don't use it. I really don't use it that much.

I pay off my balance in full each month, and I don't charge much on them anyway. At most, some airline tickets and hotel when we're travelling.

I've *heard* that when it comes time to apply for a mortage, lenders may look at credit card credit as entirely debt, even if you don't spend up to your limit. I don't want the lenders thinking I have $27-thou in debt when, in fact, I have none.

I'm sure a simpler solution would be to cancel a card, but ......

- I've had the MC since about 1994 (or earlier?), so that's my longest piece of credit history. I'd love to ditch it, though, 'cuz I hear narsty things about CitiBank. And they're American
- the Amex earns me Air Miles
- and the Visa is with the bank and gets me points.

So, I'm reluctant to part with any of 'em.

That's what I'm thinking. Am I off-base?

4 comments:

  1. I'd just find a mortgage lender who doesn't do completely stupid things like treat a paid-off credit card as 100% debt. I mean, honestly.

    And, I think it'd be a red flag for me. Like, what other shenanigans are they going to pull AFTER you're in to them for a hundred grand or so?

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  2. Yeah - no bank I have dealt with would use your credit card limits as debt. They will use your credit score, income (combined or not) to determine your potential lending amount but shouldn't use your credit limits against you.

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  3. read Gail's May 3d column, served with a slice of "I told you so"

    http://www.gailvazoxlade.com/blog/page/3

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  4. Ah, thanks lilsis ... that's probably where I saw it intially and it festered in my brain for a few weeks. The full article is at http://www.gailvazoxlade.com/blog/archives/112.

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