Reducing my credit card limits after consolidation?

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I just took out a loan for $ 10,000 in which $ 5000 paid of credit cards and I used another $ 2500, so a total of $ 7500 with all credit cards paid off. now I was thinking of reducing all my credit cards to $ 100 limit so all I’d have mainly is the $ 7500 I owe on the loan. Question is….Is this a good idea? If I kept the credit cards with the high limits would this show high risk along with a 10,000 loan? I’m working on refiancing next summer because I have a A.R.M mortgage and I wanna have the best score possibly by then..

5 Comments
  1. Reply
    kevin r
    April 29, 2011 at 10:54 pm

    You should not reduce the limits on your cards, just use them only when necessary. A big component of your credit score is the amount of available credit you have. A high amount of available credit shows lenders that you are able to responsibly handle your access to funds and that you are able to pay your debts promptly. By reducing your available credit, though it is a tempting way to keep spending under control, you actually look less desirable to lenders.

  2. Reply
    Dr. Deth
    April 29, 2011 at 11:27 pm

    keep the cards at their current limit and lock them away. Reducing the limits will hurt your credit score because you will show your balance is a higher percentage of your available credit. Pay down that loan as quick as possible, because that will affect your refinancing also

  3. Reply
    Craig T
    April 29, 2011 at 11:47 pm

    Depends, can you resist the urge to use the credit cards? If you can then you shouldn’t reduce the limits (and it doubtful the card company would agree to $ 100 limits as the cost of servicing your account would be greater than the likely profit)

    If you can’t then you need to shed some cards/credit limits

  4. Reply
    Brain
    April 30, 2011 at 12:18 am

    You should NOT close any accounts. You should not lower your limits since lenders look for a minimum of $ 2500 credit limit. Unless you can actually request it (most of the times they are jerks). Until your refi, attempt to pay off that $ 10K debt to 1/2 below the credit limit. Save save save. Supposing you are not upside down when you refinance, lenders like to see 3 months mortgage payments saved up. Also, continue to use your credit cards until the refi. Small balances and paying them off. Remember, in order to get a good credit score, you have to use it wisely. Good luck.

  5. Reply
    Amanda \
    April 30, 2011 at 1:02 am

    If you decide to reduce your credit limits do not do it until all debt is paid off. The majority of your credit score is how much credit you have verses how much you have used. When you lower your limits it looks like you are using more of the credit you have when really you haven’t charged anything new.

    I wouldn’t lower them at all but if you do wait until all your debt is paid off.

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