When you have too many unexpected expenses and not enough savings, it can feel like you've been thrown into the deep end. Matters only get worse when you know you have multiple credit cards you can use, but you realize their credit limits fall well below what you need to stay afloat.
A credit line increase could be the life preserver you need to quickly access additional cash so you can cover expenses and keep your head above water. Even if you're doing okay, you may want a credit line increase to reduce your credit utilization rate, which would give your credit score a boost. A higher credit score could mean a lower rate on a car loan or mortgage later on.
Here's how to secure a higher credit limit that will allow you to catch your breath.
Check Eligibility Requirements
Similar to when you first applied for the credit line, your credit history, income, and employment status will be considered when determining eligibility for a credit limit increase. Your payment history, including details of the current account, will be reviewed by your lender to determine if increasing your limit is a good credit risk. Factors that affect credit line increase decisions vary, but you may be declined if you opened new credit accounts or received a credit line increase on the same account in the past 90 days.
Answer Questions Accurately
You may be able to complete a request for a credit line increase online or by phone. While you won't personally provide the lender with your credit score, you are responsible for giving them accurate income and employment information. Ensure that you provide all sources of income you want them to consider in their decision.
It isn't necessary to be employed full-time to receive a credit line increase. Choose the accurate employment status from the choices provided in the credit application. Employment statuses such as retired, self-employed, unemployed, or student do not automatically mean you'll be denied additional credit. It's possible to be unemployed and still have a regular income from another source, or be self-employed or employed part-time and make a sufficient income to support an increase.
Wait for an Approval Decision
While a decision can be made within minutes of the credit card issuer checking your credit, some approvals take longer and require you to submit documentation that supports the information you provided in your application. Such delays typically depend on your ability to provide proof of income, housing payment, or employment status. The sooner you provide the requested documentation, the sooner the creditor can make a determination. If your request is approved, you can begin using the additional credit immediately.
What to Do If Your Request Is Denied
If your request for a credit line increase is denied, you should receive a letter from your card issuer that lists the reasons for the decision. Addressing each item may help, but doesn't guarantee you'll receive an increase in the future. The common reasons credit line increases are denied include:
• The account is too new
• Your credit score is too low
• There's a recent past due payment on the account
• Your income is too low to support the additional debt
• You recently requested a credit line increase on the same account
• Your credit report shows a recent delinquency on another credit account
When your request for a credit increase is denied, you'll need to be patient before you approach your lender with a new request. Creditors typically recommend that you wait 6-12 months before you reapply. The more time that passes between any negative entries on your credit report and the date of application, the better. You'll be able to use that time to demonstrate that you can make consistent on-time payments and can handle your current debt load by making more than the minimum required payment each month.
If your request is denied, you still have options. First, confirm that the information provided to the creditor was accurate. It's possible that income information was incorrectly input when completing the application. For example, annual household income might have been entered as $10,000 when it should have been $100,000.
Next, review your credit report for errors. Inaccurate data on your credit report can negatively affect your credit score. Applicants denied credit due to information in their credit reports will receive an "adverse action" letter. This notice details the reason for the denial and provides instructions on obtaining a copy of the credit report used in the credit decision. Follow credit reporting bureau dispute procedures to remove any inaccurate items from the report, and then reapply.
If there are no errors on the application or your credit reports, you might consider applying for a new line of credit. A credit increase denial can occur for reasons unrelated to your ability to repay the debt (e.g., the account is too new).
Increasing your credit limit could provide you with greater financial flexibility and peace of mind. Remember to use credit responsibly. This includes having a plan to repay borrowed funds in a timely manner.
*Note that Hanscom FCU's Credit Score and Report Review requires a hard pull on your credit, which will temporarily reduce your credit score.
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