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How Much Credit Is “Too Much?”

how much available credit is too much

By: Mr Credit Card

Is it possible to have too much credit? Should you really keep your credit accounts open no matter what?

A reader, Sherri, had this question:

I have a few questions.

We called last November to close some of our more recently opened accounts with smaller lines of credit and decided to keep the longer open accounts with the largest available lines of credit.

Q1) Was this a smart move?

When I called Discover to close my account, I was asked if there was anything they could do to make me want to keep the account open. I said no.

Q2) What CAN they do for a customer in this situation?

I almost immediately regretted closing that Discover account, since it was opened in my name and not my husbands name.

Q3) When you are married are your credit scores tied together or is that an individual thing? Should I have kept that account open? I’ve had it since 1996.

My FICO score recently went up 23 points to 744.

Q4) Was this because the 90 days to call Discover and change my mind to keep my account open had passed and it was removed from my open accounts on my credit score? Or did something else effect my credit score increase?

We have about 15 credit cards open and thought we should close some of them. You recently posted it is better to keep credit cards open than to close them. We have approximately $200,000 available to use on credit cards. We chrge about $3000 a month and we pay it off each month.

Q5) How much credit is too much?

Thank you for your questions Sherry.

Question #1: Was It A Smart Move To Cancel Your Credit Cards?

Generally it is better to leave your credit accounts open than to close them. In your situation however, I doubt that it hurt your credit score very much, if at all.

As you said, you have other, much larger lines of credit that are going to factor into your credit score. The fewer accounts you have, the more it hurts your credit score if you close one.

Question #2: What could Discover have done to keep you as a customer?

If you had asked, they could have lowered your interest rate, removed any fees on the card (annual fees, etc.) or possibly upgraded you to a better card entirely.

That’s in theory. Those are all typical customer retention offers. As far as what leeway you had with that individual card, it really just depends on the policy of the issuing bank.

If you are concerned about closing out that account, you can always call them back and see if they will work with you to re-open the account under better terms. I’m not sure how the “90 days to change your mind” works. It definitely doesn’t affect your credit score.

It’s possibly a marketing tactic, making you think that you have a deadline. It wouldn’t hurt to call and ask about re-opening if that is what you decide you want to do, past the 90 days or not. The worst they can say is no.

Question #3: Are your credit scores tied to your spouse’s?

Yes and no. Getting married does not automatically tie your credit score to your husband’s. Only sharing joint accounts, being listed as an authorized user, or signing on a loan together will do that.

Even then, it is only for those specific accounts. If your husband makes a late payment on an account that you do not share, then it will

not affect your credit score in any way.

If your Discover card was the only revolving credit account that was in your name, then you do have a problem. You will always want to keep between 1 and 3 credit accounts that have your name as the primary card holder. (Meaning that it is your credit account, and he is authorized to use it) not the other way around.

Question #4: Why Did Your Credit Score Go Up When You Closed Your Credit Accounts?

FICO scores are difficult to predict. FICO itself keeps the top secret formula under lock and key and only releases “guidelines” that we are all supposed to follow without understanding how one area could really impact another. It’s not fair, but it’s the truth.

So, the best I can do in this area is ask a couple of questions:

  • Had you recently paid off a credit card or two? If so, it may have lowered your debt to credit ratio and boosted your score.
  • When was the last time you opened a new credit account? If it’s been a while, then it could actually be that FICO is starting to reward people for intelligent financial behavior. Applying for too many new credit accounts at once will always lower your score. It’s possible that taking care of the credit you have, and closing out the smaller lines of credit can actually raise your credit score too.

I really wish I could answer that more directly, But the truth is, only the people at FICO know. There’s probably a guy out there that does nothing but walk around with a top-secret briefcase handcuffed to his wrist that contains all the FICO formulas. It’s that difficult to figure out sometimes.

As far as the publicly released guidelines go, you can read about those here:

Question #5: How Much Credit Is Too Much?

This is an excellent question, but a tricky one. The answer is, it depends on which credit bureau the bank checks when you apply for a loan.

I have heard of people being denied credit based off of an Experian credit report that said they had too many revolving accounts.

The problem is, each credit bureau has it’s own credit scoring system. And each of the three bureaus uses a different system than FICO does. Which credit score lenders use is completely up to them, they can pull your FICO score, or any of your scores from the three credit bureaus.

As far as I know, Experian is the only bureau that penalizes you for having too many revolving credit accounts (and even they don’t specify how many accounts is “too many”.)

The best answer really is a financial one: Have as many revolving credit accounts as you can comfortably manage. Whether that number is 0, 1, 5, or 30, as long as you make your credit card payments on time and do not charge more than 30% of your available credit, then all of your credit scores should be pretty healthy.

FICO’s recommendation is a minimum of three revolving accounts all with records of good payment. There is no maximum recommendation.

To go along with this question, I thought you might enjoy Madison’s story. At one point she and her husband had 89 credit accounts, with over $1,000,000 in available credit. She never did get penalized on her credit score for it – in fact her score is very, very high. That might set your mind at ease a bit.

Thanks again for your question!

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Category: Credit

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