What’s the drawback of having a higher credit line on your credit card?

Question

How does it affect your credit and loan acquisition potential?

Answer 1

When the banks look at your credit line on the credit card, they look at it as a potential amount that can be spent, so if your income went up in proportion with the higher credit line it won't hurt you, but if it affects your income to debt ratio then it may hurt it. The reason being you can one day go crazy and max out your card and your income can't support the monthly payments along with the mortgage or car payment, etc.

Answer 2

It really depends on your entire financial picture. If you carry low to no balances on your other accounts, then having a high credit line unused hurts you. However if your other accounts are not in as great of shape, keeping the high credit line open lowers your debt ratio. This is what lenders are going to want to see when reviewing you for a loan. If you close the line, it drops the amount of credit you have available, while the amount of debt does not change. For examples, say you owe nothing on the high credit line card and say it has a 25K line, but you have two other credit cards that are only 5K each, and they are pretty much maxed out. If a lender was to pull your credit report they would see that you had 35K of credit available to you, but you were only using 10K of it. Lenders usually only want to see you using 30% of your credit. Keep in mind we are talking only about the credit cards and does not include any revolving accounts you might have, car, house, ect. Those accounts will also contribute to your debt however are not equally reflected in your credit. So unless you have a lot of other open accounts with little to no balances, keep this account open to keep your debt ratio low and that will be the best way to acquire new loans.

Answer 3

A higher credit limit is fine as long as you do not ahrge it up to the credit limit. The general rule of thumb for credit and loan purposes is that you want your credit cards to be up to no more then half of what the limit is. Lower is of course better. Falls into the category of how responsibilr you are. The longer you leave the limit high with a low balance the better off you are. If you leave no balance though that can actually hurt you.

Answer 4

Having a higher credit line adversely affects your credit rating, as potential lenders use that number to determine your potential debt position. You should always keep your credit lines at a modest level, enough to cover your needs, but should a credit card raise your limit to a number you would never use, write them and request the limit be lowered to the level you are comfortable with.

Answer 5

This is a copied answer from another question I answered a week ago that was similar. It all depends on your credit score, so get all three for a better picture of where you stand. I recently went golfing with a financial specialist who works in the mortgage field. Smart cookie, teaches a class in ASU(arizona state university) and holds seminars in the like. You can buy his book at amazon.com ----"The Credit Road Map" by Patrick Ritchie--a practical guide for navigating your way to good credit------
I read this book and I learned alot more than what I already know.

Answer 6

The Credit Bureaus in the U.S. follow people's credit history based on SSN, so they will not have records of your credit in Mexico. You will basically have to start over... but its not hard. Open small accounts at stores like Sears, J.C. Penny, Etc. It is easy to get credit cards there. Once you establish a payment history with them then you will be able to get a VISA or MasterCard easier.

Answer 7

Say if you spend within your means, the only drawback is that it MIGHT lower your credit score as there's more damage if you default on your payments. It might not though if you don't have a lot of other credit line products (such as home equity line of credit, store credit cards, etc.) However, you might get more solicitation mails if your debt to credit limit ratio is low as it says that you are not spending enough. :)

Answer 8

Potential Of Overspending

Answer 9

After you've had it open for a while it actually helps your credit line so long as your running balance is on the lower end.