Your debt to limit ratio is comprised of your balances measured against your limits. The higher your limits and the lower your balances, the better your credit score will ultimately be (there are other factors, of course, that affect your score). In otherwords, lowering your credit card limits will HURT you when you go to apply for a mortgage.

Credit card companies are lowering credit limits left and right in an effort to minimize their losses during uncertain economic times. This sounds a bit like a dirty trick to me.

I beg you…PLEASE take this post down or modify it. People who need accurate information are likely to be led astray by this and end up damaging their own credit scores by adhering to one customer service representative’s misguided beliefs about how the credit system works.

One financial expert added that having many cards with over $10,000 as opposed to just a few MAY NOT (but it might) help you depending on how the lender calculates risk and credit. He said they may use the average limit of all cards and the average of all of your balances to determine your risk.

The same expert added that a student loan – in good standing – may help increase your chances of getting a loan and even the amount. He also added that car payments apparently are a very good thing – if you have a good payment history. They treat that debt differently (proving that you can pay off somthing similiar to a mortgage – responsibly) – and it can help you get future loans.

So as you can see – many, many different things apparently can help or hinder your getting a loan – and the amount of such.

Obviously getting a home loan depends on how good your credit is, which is partly based on your balance to credit limit ratio. A $5 balance on a $5000 limit is better than a $4500 balance on a $5000 limit. When you get your credit score it includes the 4 reasons your score is not higher, which can be too high a balance to limit ratio, too much available credit etc. Make sense?

My recommendation? Save some cash and put down at least a 20% (you’ll avoid PMI) towards a fixed rate 15 year note. Good luck.

For all that credit and all the charges we make, we carry no credit card debt. Each and every card gets paid off in full every billing cycle.

When we bought a house almost 6 years ago, we had absolutely no trouble qualifying for a loan. In fact, we qualified for over three times the house we ended up buying (we paid $225,000 for a solid but humble 2,300sf abode in the ‘burbs).

I don’t know exactly what our FICO score is but I know it’s excellent (I seem to remember it was in the 800’s. Is that possible?). In June of 07 we bought a new car and financed it because they were offering 1.9% financing for two years. We could have paid cash but at that interest rate, we actually earned money by taking the financing.

Anyway, my point is that I’d guess our total available credit exceeds our annual income still lenders tend to fall over themselves when we ask for credit.

But as I haven’t applied for any loans, (nor intend to apply), nor have a mortgage, I have no clue how that is working these days.

Interesting thought.

I remember another criterion too: the maximum they would lend is a multiple of your gross income (3-4x), though in 2000 they were starting to get fancy with Bayesian theories (to take in factors like job stability and likely progression…crazy-hard mathematics).

-Mike