Hi,

I have several credit cards with a total credit limit now of $35000.

I want to keep my cards but reduce the amount of credit for some of the cards.

If I reduce the amount, does it affect my credit ratings in any negative way?

Thx

No it will not affect your credit rating and will not be reflected negatively in your credit report. Just to be on the safer side, when you request them to lower your credit limit, ask them to send this in writing that it was done on your request, and keep that letter in your records.

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The potential-debt-to-income ratio matters as well as the debt usage ratio.
Low is not good and neither is too high good (for both ratios) - somewhere in the middle is best.

If someone makes $65,000 a year and has $50,000 limits in all cards combined, that's a high ratio and it's better to reduce the credit limits.

If someone has $15,000 in credit limits and most months uses $10,000 that's high usage. In such a case, it's better to reduce usage or increase credit limits.
In this case, decreasing credit limits will actually hurt, rather than help, credit scoring - unless credit usage is also reduced.

So before you reduce your limits, figure out your usage and adjust accordingly.

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"

Quote:

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Originally posted by pratickm

The potential-debt-to-income ratio matters as well as the debt usage ratio.
Low is not good and neither is too high good (for both ratios) - somewhere in the middle is best.

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Quote:

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Originally posted by frnd
Pratickm,

Can you please explain why low DTI ratio is not good?

Here is my understanding about the calculation:

Debt-to-income ratio is monthly fixed expenses divided by gross monthly income. So for example monthly income is 3000 and fixed expenses are 1500 then

DTI ratio = (1500/3000) * 100 = 50%

Correct me if I am wrong in above calculation.

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"

Hi Pratick,

I make 47K and don't carry any debt [pay everything at the end of the month]

Is 35K total available via credit cards too much?


Thanks

Quote:

---

Originally posted by pratickm

The potential-debt-to-income ratio matters as well as the debt usage ratio.
Low is not good and neither is too high good (for both ratios) - somewhere in the middle is best.

If someone makes $65,000 a year and has $50,000 limits in all cards combined, that's a high ratio and it's better to reduce the credit limits.

If someone has $15,000 in credit limits and most months uses $10,000 that's high usage. In such a case, it's better to reduce usage or increase credit limits.
In this case, decreasing credit limits will actually hurt, rather than help, credit scoring - unless credit usage is also reduced.

So before you reduce your limits, figure out your usage and adjust accordingly.

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Quote:

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Originally posted by pritesh_patel
I make 47K and don't carry any debt [pay everything at the end of the month]

Is 35K total available via credit cards too much?

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"