Governor Gavin Newsom announced on Thursday an agreement that requires all California high school students to take a semester-long personal finance education course starting by the 2027-28 school year.
If you have a credit card with a $25,000 limit, that limit counts against your total even if you are not using it. For example, if it is determined that you can sustain mortgage debt of a maximum of $400,000 at current interest rates, you will not qualify for that amount because you also have an open credit card with an available balance of $25,000 at a significantly higher interest rate.
You fully missed the point. If you read comments around credit cards you’ll see that most people don’t understand the impact of credit cards on their ability to borrow. Yes, if you do not need five cards or $25,000 credit limit (or both), then you should absolutely start closing cards and reducing limits. People don’t understand that. They go buy a car and the loan rate is through the roof. They think that is how it is and never imagine that the rate might have been triggered by the three unused credit cards.
IMHO, you should always have one credit card with a limit just slightly higher than your monthly burn rate. You should use it instead of debit cards, and you should pay it off in full, automatically, every month well before it is due. Only one credit card. Again, just my opinion.
I have bought and sold over a dozen houses, my credit has been shit and I repaired it, and I have worked for a number of insurance related tech companies that evaluate your credit. What is considered when evaluating your viability as a borrower is your debt exposure. Credit cards are pre-approved debt. If you have $100,000 of combined available credit on credit cards, then you might as well be $100,000 in debt. This is especially true if you got these cards while you were in a higher income bracket than you are currently. If you had a nice job paying $125k but had to move and now make $95k, then those cards might represent a debt burden you might no longer be able to carry. That is a huge ding when being evaluated for credit.
EDIT: By the way, most people also believe that only the outstanding balance is counted. That is true for loans but not for credit cards.
If you have a credit card with a $25,000 limit, that limit counts against your total even if you are not using it. For example, if it is determined that you can sustain mortgage debt of a maximum of $400,000 at current interest rates, you will not qualify for that amount because you also have an open credit card with an available balance of $25,000 at a significantly higher interest rate.
Then decrease your limit, LMAO. It’s not that hard
You fully missed the point. If you read comments around credit cards you’ll see that most people don’t understand the impact of credit cards on their ability to borrow. Yes, if you do not need five cards or $25,000 credit limit (or both), then you should absolutely start closing cards and reducing limits. People don’t understand that. They go buy a car and the loan rate is through the roof. They think that is how it is and never imagine that the rate might have been triggered by the three unused credit cards.
IMHO, you should always have one credit card with a limit just slightly higher than your monthly burn rate. You should use it instead of debit cards, and you should pay it off in full, automatically, every month well before it is due. Only one credit card. Again, just my opinion.
Do you have a source for this? My understanding was only credit card balances mattered.
I have bought and sold over a dozen houses, my credit has been shit and I repaired it, and I have worked for a number of insurance related tech companies that evaluate your credit. What is considered when evaluating your viability as a borrower is your debt exposure. Credit cards are pre-approved debt. If you have $100,000 of combined available credit on credit cards, then you might as well be $100,000 in debt. This is especially true if you got these cards while you were in a higher income bracket than you are currently. If you had a nice job paying $125k but had to move and now make $95k, then those cards might represent a debt burden you might no longer be able to carry. That is a huge ding when being evaluated for credit.
EDIT: By the way, most people also believe that only the outstanding balance is counted. That is true for loans but not for credit cards.