Question : Is it good to have a high credit limit to build credit?
I am 23 and looking to purchase a home exactly one year from now. For the past two or so years I've had all utility bills for a normal home in my name. Not once has any one of them been paid late. I've also had a credit card with Discover for about 3 years and I have a Lenscrafters credit card that was used once and then paid in full. Again, absolutely no late payments, although the most I've ever had charged on the Discover card was about 700 dollars, which was paid at the end of 2 months.I have a Master's degree and $12,000 in student loans that I will begin to pay off in November.My question is what is the best way to build my credit until I shop for mortgages? My credit card limit is only $1800. Should I ask for a higher limit and still carry my $0 balance with it? Does it matter?Also, any tips you may have concerning credit and ways to make it the best it can possibly be would be very appreciated.Thanks!
- asked by Elizabeth S
All Answers:
Answer #1
No don't ask for a higher limit. First off it'stoo tempting to run it up. Also mortgagecompanies look at the availability of outstandingcredit. Cancel the Lenscrafter card or any othersthat are open. Even if you don't use them, theyshow as available and it reflects on your creditscore.
- answered by teamkimme
Answer #2
Actually, you DO want a higher limit on the cardsthat you use often. Close any accounts you neveruse. And keep any accounts that have a longtimestanding.When credit companies assess your creditscore, one of the ways they do this is by theequation:monthly credit used divided by totalavailable credit.They do not like to see you using40-50% of your available credit. In other words,the lower that percentage the better.If you have agood handle on your bills, by all means ask for acredit increase. For example, if you are charging$300 a month with a $1500 limit, you are using 20%of your credit per month. If you up that limit to$3000 you are only using 10% of your credit permonth which is better in the eyes of the creditcompanies.
- answered by dan
Answer #3
The first poster is wrong.A full 30% of yourcredit score is determined by your cebt to creditratio. So if you have a $1,800.00 limit and youowe $900.00 your debt to credit ratio is 50%. Tohigh.Your debt to credit ratio should never exceed30% of your credit limit in any given month.Thenumber of credit cards you have doe's not mater,what doe's is how you manage them. O.B.T.W.utilities do not show on your credit report unlessyou do not pay them and they are turned over tocollections.
- answered by spifiman1
Answer #4
It is good that you have plans. I am assuming youhave a stable full time job for at least 3 yearsat the same company? You said that you have aDiscover card for 3 years, it is not long enough. Unless you have a pretty big down payment I thinkyou will be having a hard time getting a loan topurchase a home. You need to get more than 1credit card, but not too many. Get about 3 or 4credit cards with high credit limit. You saidyour credit card limit is only $1,800.00. That isvery low. It means the credit card company doesnot believe that you can handle debt of more than$1,800.00. Nowadays you can get a home whetherwith good credit or bad credit, BUT, they will hityou with high APR. Go to www.suzeorman.com she isvery knowledgeable on these kind of things. Goodluck!
- answered by Caitlyn
| 
