Is There Such a Thing as Too Much Available Credit?

Credit utilization is one of the primary factors that affect your credit score, as those who are knowledgeable about credit will recall.

Specifically, credit utilization accounts for approximately 2030 percent of your ValueScore and 2030 percent of your FICO score, with available credit accounting for an extra 3 percent of your ValueScore.

Based on this information, we can determine that, when all other things are equal, your credit score will be higher the more available credit you have.

The reason for this is that having more available credit will result in a lower credit utilization rate, which is good for your credit scores.

It makes sense to consider whether having credit available is advantageous up to what point. Is there a chance that lenders would object to you having too much credit available? Do they fear that you would become deeply in debt and be unable to repay your loans if you used all of your credit?

Furthermore, there are a few additional viewpoints to take into account when determining how much credit is too much. For instance, you may also be curious about the ratio of debt to available credit (i.e., how much debt is too much). e. If you use your credit card too much, and whether having too many credit cards lowers your credit score

Thus, let’s attempt to address the three main aspects of the problem—having too much debt, having too many credit accounts, and having too much available credit—in order to determine whether having too much credit could lower your score. We’ll also examine the average consumer’s credit amount so you can compare yourself to the national average.

How Much Available Credit Do You Need?

You can determine how much available credit you might need by taking your monthly credit card spending total and dividing it by the maximum credit utilization percentage that you would like to see.

For hypothetical purposes, suppose, for example, that you spend, on average, $1,000 a month on credit cards and that you would like to maintain your overall credit utilization ratio below 10% of $10,000.

The formula for calculating credit utilization is utilization = debt / available credit. Rearranging this formula yields the following result for available credit: available credit = debt / utilization.

We can now enter your ideal numbers to determine the required amount of credit that is available to you. In this example, we’ll plug in 10% (or 0. 10 in decimal form) for utilization and $1,000 for debt: available credit = $1,000 / 0. 10 = $10,000.

Consequently, in order to maintain your credit utilization below 2010%, you would require at least $10,000 in available credit based on your spending in this example.

Now you can go ahead and try this calculation using real numbers from your own life!

Alternatively, you can use this straightforward formula if you know you want your credit utilization to remain around 2020%. Simply take the amount you spend each month and multiply it by five to get the amount of credit that should be available to you.

If you spend $1,000 a month, for instance, multiplying that amount by five gives you $5,000. This indicates that you need at least $5,000 in available credit to meet your credit utilization goal or maintain your current level of credit.

You Can Have a Lot of Credit Cards and Still Have Good Credit

Even though it’s advisable to avoid opening an excessive number of accounts, having excellent credit is still achievable if your wallet is stuffed with credit cards.

Recall that the credit mix accounts for only 10% of your credit score, and the total number of accounts in your account is only one aspect of the credit mix category, meaning that it has a weight of less than 10% of the total. Therefore, even if you do have too many credit cards, that factor alone cannot give you bad credit.

In fact, the Guinness World Record holder for having the most credit cards has almost 1,500 of them! He claims to have “nearly perfect” credit, which he maintains by only using one card and paying it off every month.

How To Fix A BAD Credit Score ASAP

FAQ

Is there such thing as too high of a credit score?

Is there a such thing as having too much credit?

Is there such thing as too good of a credit score?

Is it possible to have a credit score of 1000?

Is there too much available credit?

There’s no such thing as too much available credit when it comes to your credit score. As the data suggests, people with exceptional credit use only a small fraction of what they have on their credit cards, and that has helped their credit scores. However, having a lot of available credit could tempt you to spend more money.

Can a lot of credit cards hurt your credit score?

Having big balances relative to your credit card limits, or a bunch of cards with balances, can definitely hurt your scores, credit scoring experts say. “There’s no right number of credit cards,” says Jeff Richardson, senior vice president marketing and communications at VantageScore Solutions.

Can you have too much credit on your credit cards?

It’s not possible to have too much available credit on your credit cards. Leaving a portion or all of your credit limits on credit cards untapped can actually work in your favor. It signals to prospective lenders that you can maintain a healthy relationship with credit. Here’s what you need to know when managing a lot of available credit.

Will accumulating a lot of credit hurt my credit score?

While accumulating a lot of credit over time won’t hurt your credit scores, applying for too much of it at once will. And, even though credit card issuers may provide a lot of available credit, they don’t expect you to use it all.