Does a Credit card limit (not balance) affect Loan application

[BassBomb]

Hello,

I had question on whether your credit card limit would impact a loan application. To keep things simple they are at the same bank.

I have good credit ratings and score. I've got one Loan on my account, and a fairly substantial credit limit on my CC. The CC is rarely going to hit 10% of its total value.

Would it be wise to lower my CC limit ahead of applying for a loan to have more "limit" available for the loan? Does that even matter or do they purely look at your credit score and assets

Thanks!

 

[Ns1]

The way it used to work was debt/total available credit. Lower ratio is better.

 

[Nograts]

I have a feeling if you have to shuffle crap around like this just to take out a bigger loan you probably can't afford the loan in the first place.

Either that or I don't understand what you're asking.

 

[BassBomb]

I have a feeling if you have to shuffle crap around like this just to take out a bigger loan you probably can't afford the loan in the first place.

Either that or I don't understand what you're asking.

The latter, need more available for student loan for my wife (medical). Her current student loan has a cap per year which her tuition exceeds so we need another source for the loan. I am able to cover interest costs

 

[BassBomb]

Title updated for clarity. Will reducing my CC limit improve my Loan value

Thanks again

 

[SP33Demon]

CC is revolving not installment. So i don't see how a CC limit that isn't being utilized (i.e. charged with a high balance) is going to affect an installment loan app. If anything, it would help you because your CC utilization % would be lower.

 

[RossMAN]

https://www.creditkarma.com/article/credit-card-utilization

 

[Schfifty Five]

I would think more CC limit is better as it lowers your overall debt utilization. But then again, I believe that the whole credit system is a mystery that will never be figured out (outside of the companies who generate your score).

 

[thesmokingman]

Title updated for clarity. Will reducing my CC limit improve my Loan value

Thanks again

A higher limit generally means higher capacity.

 

[drinkmorejava]

Speaking as a previous director at a credit union, no.

For mortgage and car loans we look at a few things like employment history, DTI (debt to income), and credit score, but the total credit capacity you're concerned about isn't factored into anything beyond your credit score (where more capacity is better). We'll certainly see it when we pull your report, but then it will be promptly ignored unless you give us a reason to look at it. This isn't to say some conglomerate bank hasn't come up with some crazy risk model from a huge analytical study that includes capacity and 1000 other variables, but our models are pretty straight forward.

You might say someone with a 50k credit limit is a risk because they could go use all of that and then have a lot of debt, but in reality, if they have had it for a period of time and haven't blown it all away, it means they're a responsible borrower.