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What are the most common reasons credit limit increase requests are denied?
After the financial crisis of 2008 and 2009, most banks are a little more cautious when evaluating the credit they offer consumers, including credit card debt. When you request an increase in your credit limit from your credit card provider, your current debt ratio and your projected debt ratio after the increase are taken into account. While increasing your credit limit is a good way to boost your credit score, it may not be so easy.
If you are denied for the credit limit increase you requested, consider submitting another increase request for a lower amount. Sometimes the credit card issuer contradicts your request and offers a lower credit limit which they support. Alternatively, you can search for a credit card issuer who can offer you more lenient terms.
Key points to remember
- Credit limit increase requests are determined by a complex algorithm based on your personal credit history and income relative to the credit company’s risk tolerance.
- Paying cards on time and keeping usage low is a good way to build credit reliability over time.
- Depending on the credit company you apply to, they will do a firm or indirect credit check.
- Most credit card companies won’t adjust your credit limit more than twice a year.
- Review a company’s decision not to grant a raise and work to eliminate negative marks on your credit report.
Understand the most common reasons credit limit increase requests are denied
The issuer reviews your payment history with its institution and all other people with whom you have held an account by pulling and reviewing your credit history report. These play an important role when the card issuer’s credit analyst reviews your request for a credit limit increase. The analyst determines whether to approve your application by comparing these factors against the lender’s guidelines to create a risk assumption.
Many consumers are denied a credit limit increase due to insufficient income. The credit card issuer wants to see income that can reasonably support the amount of credit requested. For example, if you only earn $20,000 a year, don’t expect your credit limit to increase to $15,000.
A credit card company will use a direct inquiry or not to determine if they are able to offer a credit increase.
Although you, as the credit card holder, are the one generating your risk report, the determination still depends on whether the credit card company believes your credit increase is worth the risk. Since you are a customer of the company, they want you to use the card because they can charge you an interest rate on purchases and advances. However, you must be able to repay this amount, because a credit default not only affects your credit score, but the company will have to write off this debt as a loss.
Usually, the reason why a request for a credit limit increase was declined is given to you by the credit card company. You may already have too much debt or have a history of late payments. The company will consider you a higher risk if you have blemishes on your credit report that show you are unable to make timely payments.
Avoid flaws
One of the most detrimental marks on your credit report that would result in continued denial of a line of credit increase is if you’ve defaulted on a card in the past. This is a red flag for the credit card company and it will be difficult to obtain additional credit if a defect exists on your report. The good news is that you can negotiate with the company you defaulted with and it’s possible to settle the defaulted amount later, and you may be able to ask them to remove the account from your credit report.
Questions and Answers about Denied Credit Limit Increase
The reason you might be denied a credit limit increase is something very personal. If you find yourself turned down, you should ask the lender why. They will discuss this with you over the phone or, more commonly, send a letter stating the reason for your refusal. However, this sometimes leaves you with more questions than answers.
Why would I deny myself a credit limit increase?
You could be denied a credit limit increase for many reasons, such as a card default, a history of late payments, a recent increase, a credit score that is too low, a credit history that is too low, too many recent claims and too low verifiable income.
How does requesting a credit limit increase affect my credit?
If the credit card company you’re requesting the increase from does an indirect credit check, it won’t affect your credit in any way. If the company does a thorough investigation, this mark will exist on your report and may temporarily lower your score. It should be noted that even if a credit card company reports a serious request, if you are approved for the credit increase and do not incur additional charges, you could reduce your overall credit usage, which would increase your score over time.
How often can you request a line of credit increase?
You can theoretically request a credit limit increase whenever you want. Many issuers allow electronic raise requests from their web portals. What’s more common, and what’s frequently mentioned by credit card companies, is that it’s more beneficial to apply approximately every six months, or if you have a significant pay raise.
The essential
Asking for a credit limit increase is common practice, especially if you’re new to credit cards and find yourself below the average credit limit (around $30,000). Make sure you understand why you might be denied a raise and work to resolve these factors before applying again, as in some cases repeated requests for raises can negatively affect your credit score.
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