zapper_89 wrote:It isn't all about the size of your...... credit available. I like how you were so excited you added an extra zero to your availability.
Granted I can't stake claim to much as a pale-faced green-horn. Although I laugh that with my $8,000 available credit, my FICOs are somewhat comparable to yours. I wonder what the threshold is for too much credit....
You're absolutely correct. But...
Here is the kicker! The credit algorithm only cares about the credit utilization percentage in determining your credit score. So if you had a credit card with a limit of $10,000 and only used $176. You and I would be considered equals according the credit algorithm. Why? Because we have the same credit utilization percentage.
($176 / $10,000) * 100 = 1.76% credit utilization.
But, say you had an emergency and you had to use your credit card to purchase something for $2,000.00 while you had your existing balance of $176. Your credit utilization would not be 1.76% any longer but 21.76%!
($2,176/$10,000)*100 = 21.76% credit utilization.
Under the same scenario, if I had to purchase something for an additional $2000.00 on top of my $5920.14 balance. My credit utilization score would be 2.35%
($7920.14 / $336,100) * 100 = 2.35% credit utilization
Now we are not considered the same credit risk in the eyes of the credit report algorithm even though we just experienced the same emergency. My credit score will stay relatively, your credit score would most likely drop significantly.