lhendricks92 said:
What you're describe looks like an up and down yo yo of credit usage. I'm not sure why this would be perceived as a healthier sign to your lenders than the typical AOR approach of 1) big pile of debt, 2) slowly pay down over 12 months, 3) no debt at all. Why not do as you suggested in your "borrow from a friend" analogy and pay your BTs off in equal payments? (One benefit would be not having to pay BT fees on the same offer every couple of months or having to rotate your BT positions so often.) Personally, my new strategy is to show about the same (overall) level of debt throughout the year - a nice byproduct of the rolling thunder approach vs. the AOR approach. Perhaps I'm missing something in your strategy, and I'd love to hear some more details.

I think having yo yo credit usage shows liquidity which is interpreted by lenders as a good thing (as it should be).

The way I figure, promotional offers and arbitrage is not built into the statistics of the lending models. According to the (incorrect) statistical models being used, holding on to money for 12 months implies that you were unable to pay for 12 months, paying in equal installments implies that you were unable to pay the full amount for most of the 12 months (you needed the installments), and paying in full after a month implies that you were able to pay from the beginning. The last conclusion is the truth for those of us at FWF and a very low risk situation for the bank, but the only way to get them to formally incorporate that information is to actually have it report to your CR (ie actually make the payment).

lhendricks92 said:I think your reasoning about deposit account usage is dead on, but you might want to consider decoupling your heavy card activity from your heavy deposit activity. For example, I use Fidelity as a hub for moving large sums of money. They don't seem to care, but they also don't have any of my credit accounts. There's no way I would treat my BofA deposit accounts in the same way - BofA is too important of a credit shop to get them upset with questionable deposit activities. By the same token - and here's where I disagree with SIS - I think it's a good sign to have deposits on hand with your most important lenders. (He would say this is a bad idea. I'll find a link later if anyone's interested.) This is one of the only ways for Citi to know how rich Dolmar is, for example. The key is not to use these accounts as a hub for moving large amounts of money to and from other institutions. Make these accounts fairly stable.

Decoupling my activity has not seemed to help, but I do think that brokerages are much more resolute than banks when it comes to large transactions. I believe that it may be because brokerages are used to being treated like casinos by some people in addition to more lax regulations. Regarding keeping deposits with important lenders I personally have, thus far, been too greedy to experiment with it. I put my money where I get the best return.

DaveHanson said:You seem to be using a non-standard conception of "utilization" here. Standard usage in the credit context refers to how much of the credit line(s) are drawn at any particular time. Hence utilization does NOT refer to the "round trip process of borrowing and paying back". Depending on the context, one might refer to "absolute" utilization in dollar amounts (e.g. $10K utilization), or "relative" utilization WRT the line size (e.g. 40% utilization if the line size is $25K.) Generally credit scoring entities like FICO specifically refer to the latter, relative calculation. Here's the first example a google search on "credit utilization" turned up, straight from Equifax : Credit utilization is defined as total remaining revolving credit debt (e.g. credit cards) divided by total credit debt as a percentage. Note that both these notions are different from "reported utilization", which refers to the debt levels that are reported to a consumer or business credit reporting agency, and can diverge widely from the borrower's true utilization at any particular time.

What makeinu is referring to might be described as "charge volume", so I'll use that term going forward. So if I charge my entire AND pay it back twice in thirty days--leaving me with a $0 balance--my "utilization" sits at zero, but my "charge volume" has been very, very large.The CC issuers like high utilization. Period. Utilization makes them money; If it didn't then they wouldn't be in the CC business. So the more utilization the better. If we mean "utilization" in the standard sense I just defined, this statement is mostly incorrect. First, creditors don't make money on utilization per se. Second, they believe (correctly) that there are high correlations between borrowers with high utilizations and those who don't pay back their debts. Third--related to, but distinct from the second point--the credit scoring agencies, on whom creditors rely heavily, always have sharply penalized high utilization.

Fair enough, but in that case the standard concept of utilization is not a discriminating factor. It marks both the best and the worst customers, the difference being that the best pay and the worst don't. High utilization may very well indeed kill a credit score, but I doubt that credit score alone would trigger an adverse action. A drop in credit score may raise a flag, but I imagine that any proprietary analysis would and should allow charge volume to mitigate.

Remember that the excuses given by lenders, deposit holders, credit agencies, etc do not always match the true underlying reasons.

DaveHanson said:Now, if we substitute "charge volume" for "utilization", then makeinu's point hits much closer to the mark. Provided it's done on standard, non-promotional terms, charge volume is indeed very profitable for the card issuer. But even there, creditors worry that extremely high charge volume is a high risk factor for fraud or other issues. This explains the many reports here and elsewhere of adverse action following on the heels of massive charge volume.
So the answer is very simple: the fewer payments you make, the less likely you are to make payments in the future.This is also close to the mark. I would simply replace "fewer" payments with "fewer and smaller". I have been at nearly 100% utilization for the last couple of years now and have not experienced any adverse action from them since. I believe the reason why is because I MAKE PAYMENTS which show on my credit report. I don't borrow $100k and seemingly teeter on the edge for a year before paying back. When I borrow $100k I pay it back within a statement or two. Some months my credit reports show available credit way over my income and other months they show debt way over my income, but the issuers do not bat an eye because, most importantly, my credit reports show corresponding regular payments. The issuers can clearly see that my ability to pay is consummate with my ability to borrow and income has nothing to do with it.There's a lot to unpack in those few sentences. First, if you "pay it back within a statement or two", that means that you're making LARGE and FREQUENT payments. And I emphatically agree that if you do this consistently, card issuers will generally have no problem with it and even thank you for it. Second, it would be more helpful to get more details on precisely what you mean by "utilization" here, as well as what your "credit reports show". If they really do often show you as being almost "maxed out" across all your lines, then you have been fortunate indeed to avoid AA, notwithstanding your large payments. Third, what do you mean by your credit reports showing "corresponding regular payments"? Most reports do not show payments at all...perhaps you mean something else?

Perhaps I'm mistaken, but I'm pretty sure that whenever I've ordered my credit report in the past it has shown payments. At the very least it shows month the month balance, from which payments can be inferred if properly timed.

DaveHanson said:VERY interesting. Precise details would be very helpful here, particularly on the credit AA you experienced. There are very few reports of anyone who kept each one of their individual lines below 50% getting AA, and when they do, it's often because they did a massive AOR (many inquries and many new lines), or otherwise did something to invoke the wrath of credit issuers. Note I'm not saying you're wrong on the facts here--I've known you for years to be a highly credible source. I just question whether the inferences you're drawing from those experiences are warranted.

Well, I have to admit that I was not below 50% on each individual line, but rather below 50% overall. Still I have experienced adverse action just due to inquiries while below 50% on each and every line. I don't keep meticulous track of this stuff so I couldn't tell you much more details, but I've never found keeping below 50% utilization on each individual to be a particularly worthwhile strategy because it requires applying for more cards in order to spread things out and I prefer to use many of my inquiries for things other than AORs.

DaveHanson said:Again, a lot to unpack there. First, it assumes an issuer will be aware of variations in your deposit accounts. Even if you deposit and borrow at only one place, your issuer won't know that, so won't be able to infer much. Second, large variations in activity are themselves a high-risk factor. This doesn't mean your point is without merit though. If you do larger charge volume than usual with an issuer while leaving untouched the large deposit balance you have there, you'll almost certainly leave that bank resting easier.

I was referring to adverse action from depositories due to variations in my deposit account balance, independently of borrowing activity (whether borrowing from the same institution or elsewhere).

DaveHanson said:Here your answer makes sense in theory, but doesn't hold true as a matter of empirical practice. Consider: how often is someone in trouble likely to go from little-to-no charge volume to huge utilization, only then to pay it all off a few months later? No doubt it does happen. But while I don't have proof of this, I'm certain the far more likely scenario is that the person who charges much more than usual gets in over their head, leaves the issuer holding the bag. This is why aeiouy's point has merit.

Yeah, but by cutting someone's line of credit the lender is not only ruling out the possibility of pyramiding debit in a short period of time, they are also ruling out the possibility of gradually increasing debt over the next several years. I don't see how not using the available credit in the past would make either scenario more likely going forward.

Figure I should post this here as well.

I was denied penfed's 5% gas card because of my "VERY HIGH" outstanding available credit.

Not utilization (less than 5%) only a daily spender really - but about $150k in available credit.

HHI = $60k / year

They said anything over $25k is too much for them to issue any new credit - I almost laughed at them. They had not 2 mo. ago issued me a $112k home refi. (granted secured but seriously I couldnt get a $10k credit line?)

Was really pissed - I sent in a request to be rechecked as I have never had a ding on my credit and have no outstanding debt besides my house - and they declined again same reason - too much available credit for current income.

Close the ones you dont want now or you might lose them later might be the best option.

I'm planning on talking with Citi tomorrow to hopefully reinstate the cards they closed. But in the meantime, I found an interesting article in the NY times today about mortgages. Specifically, it states the following:

DEBT-TO-INCOME RATIO This is the percentage of a borrower’s income that goes toward paying debt. Lenders calculate it two ways. There is the front-end ratio, which includes housing costs like the mortgage principal and interest, mortgage insurance premium, if applicable, and property taxes. The back-end ratio includes any other debts like car or student loans, credit cards and alimony. Mortgage companies used to take applicants with debt-to-income ratios as high as 55 percent, brokers say; now the maximum is in the mid-40s. By the way, a borrower’s credit card limit counts as actual debt, regardless of whether the card is even used.

If you notice, at the end it states that CC limits count as debt whether or not they're used. Granted, I'm very unfamiliar with mortgages having never gone through the process, but is this new?

dblevitan said:If you notice, at the end it states that CC limits count as debt whether or not they're used. Granted, I'm very unfamiliar with mortgages having never gone through the process, but is this new?No, just sloppy reporting.

It is true that SOME mortgage issuers count available credit against you. But that is not standard practice, and is the exception not the rule.

HKGFlyer said:When I called up to inform them that I didn't really want this kind of "service," I was told that I would have to reapply... this involved a hard pull on my credit. Hopefully, I'll be approved (again, I have excellent credit, mid six-figure income, no history of missed payments-- ever, etc.).

The reason my account had been cancelled was that I hadn't used it for 48 months. Still, I use it as a "safety," if something happens to my Visa or AMEX that makes them unusable. It would have been nice to have been given the heads up and not have to get a hard pull on my credit report. At least I didn't get caught off guard by attempting to use it somewhere and being declined.

You should be able to get it "reviewed" instead. This should not involve a hard pull and you should hopefully be able to convince someone to let you keep the account. Although, unlike Chase, they don't do the review right away and you can't speak directly with the credit risk department, as I discovered this morning when I called up to have my accounts reviewed.

Your experience is also more proof that Citi is doing this universal review upon getting any red flag. Unfortunately in your case you'll probably have problems since you hadn't used the account for so long and Citi Credit cards don't really seem to care much about who you are or your relationship with them.

So for all of their fear-mongering about having too high credit limits, Citi had no problems reinstating my two closed accounts today. I did close out about $16k of credit lines (I didn't need them anymore and this still leaves me with over $100k in credit) a few weeks ago. Unlike Chase, I was not able to speak directly with the people making the decisions or I would have grilled them on what I had been told before regarding high credit limits. Also, for anyone wondering, I decided to pull my credit report and got a score from Experian's FreeCreditReport.com, which was 729 with day-to-day balances on all cards but still showing a balance of $20080/$23430 on a Citi cards (which was paid off earlier this month but I guess hasn't reported yet). I assume a month ago it was probably 100 points lower or so.

I just got this again on my older card with Citi that was closed and then reopened. Last time they did this the call triggered the review. I'd wait for a week to see if you get a letter stating that your account has been closed.

I

As a follow up, a few days later (and two hard pulls on my credit report by Citibank spaced two days apart), I received a new card in the mail: same card number, same credit limit.

I'm now looking for the most useful Mastercard (one with frequent flyer miles) offered by another bank. Once I find it, I'm closing my Citi Mastercard and moving on.

We should all take these reports as a warning to use any cards we care about.

It seems as if a lot of Lenders are culling their customer base and dumping customers that are viewed as risky or unprofitable.

As much as a pain as it is to manage small balances I am going to make certain I keep my cards active.