Credit card limit increases happen from time to time based on the creditor’s review of your credit card account. These reviews could happen once a year, twice a year or even four times a year based on the creditors policies and procedures. The million dollar question is this. Do I have to wait until the creditor reviews my credit card account to receive a credit card limit increase?

Answer

The answer is no. Credit limit increases can be initiated by the consumer; however, there is a strategic method in which to do so.

Let’s first look at what factors may affect you in receiving a credit limit increase.

• Low activity on your current credit cards
• Zero balances on your current credit cards
• Low credit limits on your current credit cards
• Collection accounts

You may think well, I thought having a zero balance on my credit cards is a good thing! Well, it is and it’s not. Here’s the key. Why are credit card companies in business to do what they do? Credit card companies are in the business to make money!

The only way credit card companies make money is if the consumer loans money and then pays the loan back over a period of time. What does this do for the credit grantor? It allows them to collect interest off of the loan. If credit grantor’s extend consumers a line of credit and the consumer never uses it, the consumer does not prove to be a source of revenue.

Basically, they are not making money off of you at all.

You have to keep balances on your current credit cards at least 3 times a year to prove to be a source of revenue for the credit grantor. Why would they extend you more credit if you never use the amount that they originally granted you? They won’t!

How do I get a credit limit increase?

A little secret that most consumers may not know is “When” to request a credit limit increase. First and for most is this, make sure your credit report has been repaired by a professional or you can repair your credit yourself if you know what you are doing. If you do not need credit repair then credit repair does not apply to you.

Let’s first look at when consumers spend the most money. Consumers spend the most money in the Fall (school) and holiday’s. Holiday’s are a huge money maker for retail stores and credit card companies because consumers borrow money to pay for gifts. Then they spend all year trying to pay it back to the credit grantor.

Now, the more money credit grantors have the potential to make, the more likely they will authorize a credit limit increase. What you need to do only if your credit report is in decent shape is contact the credit card companies that you currently have open accounts with and do the following exactly what I’m about to tell you.

Let them know that you want to use their credit to purchase gifts, but your credit limit is low. Tell them that you have consistently been on time with your payments and you really want to purchase some items for your family members. However, the cost of the items you want to purchase cost more than your credit limit.

They will see dollar signs in their eyes and start drooling over the interest they will make. The important thing to remember is, your goal is to get a credit limit increase, not to actually “use the credit increase they provided you”.

The strategy here is to steadily raise your credit limits in a precise way throughout the life of your credit card. The more credit extended to you the more trust worthy you look to future credit grantors. Even if you are only extended an extra two to five hundred dollars, every little bit helps and it reduces your debt to credit extended ratio.

Remember, your goal is to have high credit limit credit cards. Be responsible in this strategy and like always, do not use more than 35% of your credit limit unless it is absolutely necessary.

Empower – Educate – Take Action

H & I Credit Solutions

In this post-crisis economy, unemployment rates are at record high, stock markets are constantly plunging, people are under financial strain, many of us are falling behind on their mortgage payments and are fearing the risk of foreclosure. To avoid foreclosures, the US government came with an ambitious plan – loan modifications (lower monthly payments for longer period of time), which later turned out to be insufficient to stabilize the situation.

But actual problem is that the failure to make mortgage payments severely hurts your credit score. You’ll be surprised to know that about 10% of all the mortgages are non-performing, i.e., were past their due dates. You can easily guess that millions of homeowners are on the verge of default. The drastic fall in credit score due to failure to pay mortgages (more than 100 points) may take years to recover (doesn’t matter if you check your credit score 200 times a day, it just won’t). Lower consumer credit means you either have to pay higher interest on any future credit or you get no loan at all. A high credit score is essential to fetch lowest interest rates.

What Factors Affect Your Credit Score?

Missing the mortgage payments when they are due is what lowers your credit score in the first place. Some score cuts are expected and known to the homeowner, whereas others come as a surprise. Let’s have a look on the consequences.

Foreclosure

Foreclosure is when the bank/lender takes possession of the house when the homeowner fails to pay home loan installments for 120 days, to sell it in an auction to the highest bidder. Banks are in no hurry to foreclose your house unless you have missed several payments. Late payment has negative impact on your credit score because the lender reports each late payment to the credit bureaus.

According to FICO, foreclosure and bankruptcy are considered the most troublesome events by credit bureaus and they damage your score the most. When unfortunately your house if foreclosed, the higher your score, the harder you’ll fall. A low credit score drops by 85 to 100 points, the average score would plunge about 120 to 140 points and a prime credit score falls by 140 to 160 points.

Don’t ignore the letters of notice sent by the creditor if you want to avoid foreclosure, because when you do so, the bank files a notice of default to protect its own interests. Receiving a letter at this moment from the lender might be embarrassing but you can’t ignore it. Call or write to your bank explaining your hardship, monthly income and expenses and other details.

The lender then evaluates your situation and may propose one or more options to help you. It may be a repayment plan called forbearance or bank may spread out the missed payments over the coming months. For example, if you have missed the payment of $3000, the lender can add $250 to each future installment for 12 months. Just a little proactive approach can prevent the loss of about 150 points on your credit report.

Short Sale

A short sale, quite a recent phenomenon, is a deal between the bank and homeowner that the homeowner will sell the house for less money than actually owed. Though it is sometimes considered a major derogatory incident, the impact of short sale is less severe than foreclosure on your credit score. You have to submit all the financial details to lender and get the short sale approved by them. They will check your financial status to see how much of the difference (between actual amount owed and price of short sale) you can pay or the bank has to suffer the loss. If you are found to be eligible to pay the difference, the bank is likely to force you to pay the difference in order to minimize its loss.

Short sale is an absolutely legitimate process. It gains momentum when the home sales are plunging, prices falling and the lender is financially weak enough to say – something is better than nothing.

Unlike foreclosure, you get an opportunity to frequently communicate with the bank. In the process you negotiate the reduced pay-off as well as how the lender will report to credit bureaus. You can save as much as 35 points if your bank reports short sale as “Settled as Agreed.” So, feel free to negotiate.

US Government’s Mortgage Assistance Program

To help the troubled homeowners, the Obama Administration extended hands with its flagship ‘Making Home Affordable’ program. You have to go through a trial period of three months to enroll the program. As soon as you enroll for the Making Home Affordable (MHA) program, you get a nasty surprise: drastic fall in credit score. Almost 100 points!

According to homeowners and housing counselors, it’s just unfair. Why should you suffer such a huge loss for doing the right thing? Many homeowners around the country are angry because it comes almost as surprise. But the credit rating agencies justify the fall stating that people look for financial assistance only when in severe financial trouble. So any request for loan modification means a sharp decline in your credit rating. You’ll notice its consequences when getting new loan or applying for a job.

To tell you the truth, Obama Government is fully aware of the MHA assistance lowering consumer credit. According to officials, it is still far better than foreclosure which crushes your credit score so much that it may take years to recover.

Loan Inquiries

Loan inquiries are likely to hurt your score for one year. First, when you check you your score thousands of times, the score won’t be affected at all. But if a potential creditor checks your score that will have an effect. According to credit rating agencies, many potential creditors inquiring your credit score indicates you must be starving for cash and panicked, so you are trying to fetch credit from any source you can find.

If you really want to go on a spree of loan shopping, do it all within a window of two weeks. All the inquiries in that period are considered as one by FICO.

The current mortgage crisis in the US has made consumers unable to make payments on time and the default rate is expected to go higher than it is now. You should be patient and persistent to successfully handle the situation without hurting your credit score.

Empower – Educate – Take Action

H & I Credit Solutions