Posted by Bahhumbug on June 15, 2004 at 21:46:32:
How much credit is too much? - Posted by Drew
Posted by Drew on June 15, 2004 at 13:45:19:
I understand that if credit card limits get too high, lenders get queasy because they know you potentially could go deeply into debt very quickly. So, the ratio (limit/gross income) should not be too high.
On the other hand, if you carry a balance (which I don’t), a higher limit could help your score since the lower the ratio (debt/limit) is, the better the score.
So, there must be some balance here.
The question is, credit limits should not exceed what percent of gross income? I mean, before credit scoring is affected.
Thanks to anyone who knows the answer.
Drew
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Max of 20% gross income or $10K - Posted by Drew
Posted by Drew on June 16, 2004 at 13:57:57:
Found an answer to my question at the following:
Thanks to those who replied.
Drew
Re: How much credit is too much? - Posted by Nancy LA
Posted by Nancy LA on June 15, 2004 at 20:15:02:
I am a loan officer. I can help answering your question. Most lender will not lend if your debt to income ratio exceeds 50%, the debt is any debt, not just your credit card… Your concern about credit card limit is should rather be it’s affect on your credit score. Once you owe a debt on your credit card close to it’s max credit line, your credit score will fall dramatically,. so always never exced 2/3 of your credit line on your credit card.
The lender will take in consideration of all your debt obligations including the estimated mortage payment (PITI), add all your monthly debt and divide by your total monthy income to get the DTI ratio… If it exceeds 50%, you’ll need to apply the loan based on Stated income… the rate can be a little higher. in that case, lender will not see your income docs, only use what ever income you said you make, but it has to be reasonable for your profession.
But always try too keep a long history of trade lines, keep accounts open, don’t close them before getting a loan.
hope this helps a little
Re: How much credit is too much? - Posted by Amy (TN)
Posted by Amy (TN) on June 15, 2004 at 13:51:09:
Drew, the best place to read about credit like you are talking about is the discussion board called Straight Talk, in the consumer section of creditnet.com. You’ll have an amazing amount of reading there. I like it because it’s by consumers for consumers, so you can find out what is really working as opposed to what credit bureaus and card companies want you to think.