I have very good credit, my wife has pretty good. We have a high debt to income ratio. We also have high, only partially used, limits on our credit cards. I was thinking it would be good to reduce the total available debt we had (the total of the cards available limits) but then I saw that they measure each cards score by the % of available credit used.. so which is better- reduce the total available credit, or keep the high limits with the relatively low balances?

We are talking three cards with a 1) $15,000 balance versus a $25,000 limit, 2) a $0 balance versus a $8000 limit, and 3) a $5000 balance versus a $18,000 limit.. don't tell me to pay down the cards quickly, as that is not an option although we do pay at least double the minimums due... the highest balance is locked in mostly at 2.99%, some at 9.99%, the others are are variable around 13%, but they are Alaska Airlines cards with important benefits to us, and we are trying not to transfer around cards anymore, although we still get transfer offers for 0% every now and then.

I would not do anything in your case. The higher your total credit limit ($51,000 between 3 cards, in your case) the better. Debt to credit ratio accounts for 30-35% of your total FICO score. Examples using your figures:

$20,000/$51,000 = 39% <----Current Debt/credit ratio

39% is pretty high. Ideally, it should be 20% or lower to achieve optimal points on your credit score, but I won't razz you about carrying debt. Everyone these days does.

Carrying some debt is actually recommended; 20% or lower is better for your score than 0%, which would likewise hurt your score as much as it being too high!

Now, Suppose you lowered your credit limits on all three cards by, say, $3,000 per card, or $9,000 total.

$20,000/$42,000 = 48% <----debt/credit ratio after lowering Credit limit $9,000

It went up about 10% and, in turn, your credit score will go down many points.

Hope these examples help to illustrate why you should just leave your limits as they are.

hello AKRBT, just the conversation I was looking for. About 5 years ago I had put fixed amounts on all my credit cards & wouldn't let the card companies give me those automatic increases they like to give, only to learn I had don't a bad thing for my credit rating. I had gotten into trouble with credit in the past & didn't want to risk that happening again, so I thought I was protecting myself.
I came to learn I was hurting myself by doing this. So ... about 2 years ago, I took off all the limits, let them start to pour on the high limits, & started using the cards. I always carry a balance which I continue to transfer between cards as I receive low interest offers. I've keep going around & around with this for the past 2 years & my credit score/rating is amazing now.
This has been working amazing for me ... so I just wanted to share to give you something to consider.
All the best. Sam

Thank you both- good advice..

by reducing your credit limit it will hurt your score, I believe it's less than 50% your limit.

Yes, keep those limits high to maintain a good FICO. Interestingly, I saw Dave Ramsey today on TV, and he recommended the opposite, cut up cards and close accounts! He says personal impulse is too dangerous. Its a personal choice - I have enough discipline to not get carried away.

Other hints to help FICO include keeping individual balances below 50% of limit. Under 30% is even better. This one irritates me to no end, as I roll my balances around like sjohnson2 does. When I get a good balance transfer offer, I usually max it out. With the same overall ratio, my FICO dipped a couple points. This is wrong in my mind, and ConsumerAffairs.com even posted my complaint for others to beware.

Its good to have a card with rewards. But, the best way to handle this is to pay this card off every month without fail. I have debt spread across 5 low interest cards right now (average under 3%). But my United Airlines card is one I charge everything on, then pay off at the end of every month. I would recommend you move this balance to a low interest card. Your paying them interest fees does not give you extra miles, right?

You might take a look at www-DueMinder-com for free, on-line sofware to help track your debt and predict a payoff date. It implements snowballing payment strategies by Dave Ramsey and John Commutta.

Reducing the total available debt not used will improve your score. However don't do it too quick or it could hurt your credit.

As others have said I'd stay where you are at. That seems to be the most viable option in your case. I've been really tempted to up my limits but I learned the 'spend only what you have' lesson the hard way.

It is always better to have a higher credit limit and use only up to 25%. This would have helped you to get a better credit score. Higher credit limit is also good in case of emergencies.

<b>False.</b> Mom, reducing available debt will hurt your credit. Feel free to check out myfico.com to learn more about how your FICO score is actually calculated.

Lowing your available credit will hurt your credit utilization, especially if you tend to carry a balance.

About the only time you would have to worry about to much credit is if your available credit is more then you make a year or if you are able to buy a house or plane with it. I don't think you will have those issues.

Also, with the credit card companies cutting and canceling accounts left and right, I don't think you will have to wait to much longer for them to do it for you. Then you will be really happy you didn't do it yourself.