Credit Limit Increase – How and When Should You Request

A credit limit increase is a net-positive scenario for your credit rating and report. You just have to avoid spending your balance and carrying a higher debt. If you can accomplish that, your credit limit increases will benefit your utilization rate. This is huge as it accounts for 30 percent of your FICO score calculation.

However, there is always a right and wrong time to try for a limit increase. You need to know the best approach for this process before moving forward. To understand more, read the advice found below.

Credit Limit Increase

 

How You Request a Credit Limit Increase

You can call the support line for your credit card issuer. From there, it is possible to inquire about adjusting your limit higher. This might result in a hard inquiry, but it is not always necessary. It all depends on your card provider and the strength of your credit report on your initial application.

Some card providers even offer the chance to request a limit increase online. Check your dashboard for this option to find out more. Also, take a look below for an idea on which card issuers require a hard inquiry to qualify.

Hard vs. Soft Inquiry, What Will Your Card Issuer Do?

Many cases vary based on the amount of the increase. For instance, anything above $1,500 through Wells Fargo typically requires a hard pull. Below that amount, however, would be a soft pull.

Here’s a look at what to expect from many popular card issuers:

  • American Express: No hard inquiry is required.
  • Bank of America: Usually a hard inquiry through TransUnion.
  • Capital One: No hard inquiry is required.
  • Chase: A hard inquiry when you request an increase.
  • Citibank: Some increase requests require hard inquiries.
  • Discover: Larger increases require a hard inquiry.
  • USAA: Usually a hard inquiry through Equifax.
  • S. Bank: Larger increases require a hard inquiry.
  • Wells Fargo: Certain cases require a hard inquiry.

Of course, these claims are not set in stone and can change with time. Your issuer might treat your situation different than others. It is best to ask first. If you are offered a credit limit increase suddenly, chances are you are pre-approved and the inquiry might not be necessary.

When to Ask for a Credit Limit Increase

You can ask your card provider for an increase at any time. The likelihood of approval will boil down to your credit history and your repayment history with that company. Sometimes there will be a hard rule in their system for accepting increases, such as only after so many months.

If your credit score is less than perfect, you might not hear about the possibility of increasing your limit any time soon. You can always ask your card issuer to see if there is a typical time frame for when the offer increases.

Tip: Wait until you get your first increase from the card provider, as it is likely to happen, and then inquire 3 to 6 months later about a further increase.

Requesting Credit Limit Increases on Secured Cards

This is where things get a little tricky. Secured cards do not work the same as unsecured cards. Some can transition into an unsecured card, and you might get your security deposit back, but not all issuers offer this.

You need to look for a secured card that converts to unsecured. This action lets you continue with the same credit line, which won’t hurt your average account age. You can take on the higher limit as well and get the utilization rate boost. Plus, it gives you the chance to give a higher deposit to build off.

What to Avoid When Asking for a Credit Limit Increase

First off, you should not make it look like you need the extra money. It should be about growing your overall credit availability and proving yourself with higher balances. This is necessary to show that you are a good borrower, beyond a measly $300 or $500 credit card. It will help you with proving yourself to an auto or mortgage lender, too.

The biggest sign of needing the extra cash flow is requesting the increase when your balance is near the limit. This shows you potentially cannot repay what you owe right now and that you might need extra financial assistance at the moment. So bring your credit utilization rate for that particular card to 30 percent or less.

You can always put the balance on a difference card for the month leading up to when you inquire about raising your limit. This is even more effective if your card issuer does not plan to pull your credit file. However, if a hard inquiry is necessary, it is better to reduce your overall debt load before you inquire.

Conclusion

Credit limit increases are golden opportunities for people looking to build credit. But it can be hard to get them if you have a lower credit score. You never want to deal with rejection, and hard inquiries can hurt your credit. However, the better credit utilization rate and long-term effects make it all worthwhile.

Take your time to plan out when and how you ask for a credit limit increase. Your issuer wants to make more money — so chances are you will get an offer soon enough. But you should still learn how your issuer typically handles increases and make your own request when it seems right.

Sources:

http://www.doctorofcredit.com/credit-cards/which-credit-card-companies-do-a-hard-pull-for-a-credit-limit-increase

http://www.doctorofcredit.com/increase-the-limit-on-your-american-express-card-by-up-to-3-times-its-starting-amount/

http://www.magnifymoney.com/blog/building-credit/convert-secured-card-unsecured-credit-card/

https://www.nerdwallet.com/blog/credit-cards/credit-limit-increase/

Credit Report Errors: Why, How and Solutions to Fix My Credit

Credit report errors can happen to anyone. It affects roughly 25 percent of files in the United States. This statistic is high enough to cause alarm, and one in 20 files have errors that cause financial damage. A small percentage of these instances involve borrowers with wrongfully reduced scores of 100 points or more.

Credit Report Errors

Check for Credit Report Errors First

If you’re concerned, check each of your credit reports (Equifax, Experian and TransUnion) to see if there are any incorrect entries. Begin by scanning for information that doesn’t line up properly. There might be different balances, payment dates or your account might not even show up.

Keep in mind: credit-reporting companies are only required to provide information to one of the three bureaus. It’s possible to have details and accounts on one file that aren’t on the others. This is a leading cause of credit report errors and it’s not always easy to fix.

You can get your files from www.AnnualCreditReport.com, the government-authorized source for your free annual report. This is a right for American consumers, thanks to the Fair Credit Reporting Act (FCRA). If you’ve already requested a file and you want more current information, you can pay a nominal fee to each bureau for a fresh copy.

Common Types of Credit Report Errors

Sometimes, a credit report error is because of an innocent mistake by one of your credit card providers or lenders. Other times, it might be a mishap with your work’s accounting department. Worst case scenario, the errors on your report are a sign of credit fraud or identity theft.

Regardless of the details, any wrongful entries on your credit report should be taken care of immediately. If not, it’s possible for the negative effects to carry on for years — while keeping your credit score down in the process.

Take a look below for some tips on clearing up certain types of errors.

How to Handle Mismatching Credit Reports

Unfortunately, you can’t force the reporting company to notify the other bureaus if they only reported to one. This can put you at both an advantage and a disadvantage.

It’s beneficial if you have negative items and they only show on a single file. However, it can be a serious setback if your positive items are not there. It can result in your FICO score dropping — which means more rejections and higher interest premiums.

Your best bet is to contact the credit-reporting agency. You can request that they report to the other bureaus. If they won’t, there’s little you can do, “by force,” to make it happen for you.

How to Remove Outdated Information

Your credit report can only contain negative items for a set time frame. After the period runs out, you’re allowed to request removal of any items that still show. To do this, you must send a dispute letter to the respective credit bureau(s). This is also the standard process for dealing with errors. Outdated information is different since it’s so easy to check and prove, so no further information is needed.

You’ll hear back in 30 days or less with a decision. If you have a delinquency stated on your file, inside the acceptable reporting period, you’ll have to prove to the bureau that it’s incorrect. In most cases, this happens when debt goes to a collections agency — as it gets reported with a delinquency, inaccurately, on a more recent date.

How Long Does It Take to Fix Errors?

The FCRA states that the credit bureau you send the dispute letter to must get back to you within 30 days. They’re required to investigate your claim and determine whether there’s any accuracy to it. The simpler issues tend to get fixed right away, but it’s possible you’ll be asked for more documentation.

Should You Use Credit Repair Services?

Credit repair companies focus on fixing your credit report, not your score. The goal is to make sure that all information matches up between each of your credit files. It means an expert will work with you to go through all your credit reports. They’ll have a much better eye for finding errors.

However, most of the time, you can identify the errors yourself. It only becomes important to consider hiring a credit repair agency when fixing the problem. This will save you a good 30-60 hours in paperwork, phone calls and other tedious processes. It also means you have a greater chance of removing the error, as your case will be represented as best as possible.

Credit report errors are always a headache. However, you don’t have to stress over the situation too much. Credit repair professionals can take all the manual work out of the reparation process. The law is also by your side when it comes to removing inaccurate negative items.

Things will only get more confusing if you’re dealing with fraudulent entries. In this case, you might need to supply police reports, FTC Identity Theft Affidavits and much more. The problem could take 100s of hours to resolve as well, which is when a credit repair expert can really save the day.

Sources:

https://www.consumer.ftc.gov/articles/0155-free-credit-reports

http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same

https://www.creditkarma.com/article/credit-report-differences

https://www.thebalance.com/removing-old-debts-960491

https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report

http://www.cnbc.com/id/100449912

FICO vs. FAKO vs. VantageScore

FICO vs. FAKO vs. VantageScore – Things can get confusing when you try to learn about your credit rating. You might get a free credit monitoring service and be happy to receive a free score. However, the number you get is not necessarily accurate — and sometimes it is off by 100 points or more.

To put it simply, your FICO score is the most accurate estimate of your credit rating. Your FAKO score is a non-FICO score. It is not as accurate, but it still gives you a good idea of your score. Your VantageScore is similar, except it stands a better chance of getting used by a prospective borrower.

Fico-Fako-VantageScore

Understanding FICO Scores

There are more than 50 FICO score versions that exist. The most common ones are the FICO Auto Score, Bankcard Score and FICO Score. The particular model which gets calculated is dependent on the type of loan you require. For instance, a mortgage would use a basic FICO Score version while a credit card could get applied for with your Bankcard Score.

The way your FICO score gets calculated is dependent on the version. Typically it will range from 300-850 points. The calculation breakdown is as follows:

  • 35 percent for payment history
  • 30 percent for credit utilization
  • 15 percent for average credit age
  • 10 percent for new accounts
  • 10 percent for credit diversity

Your FICO score will get calculated individually with each of the major credit bureaus. A borrow can have different information with each of their reports. A lender will also choose one of the bureau files to pull. Therefore, your qualification requirements and score can vary depending on the information you have with each file.

The vast majority of lenders determine your eligibility by looking at one of your FICO score calculations. This is the figure you should use when attempting to improve your credit, as well.

Why Your FICO Score is So Important

Nine out of 10 lenders in America are using a FICO scoring model to determine financing eligibility. The most common model is your basic FICO score, which uses the calculation algorithm listed above. However, the way your score calculates can slightly differ depending on the purpose of the financing.

Your Auto Score

This credit rating algorithm is all about making sure you can afford a new vehicle. It looks at your overall monthly affordability based on your current debt obligations. An auto lender will be able to overlook certain things that a credit card issuer might not put past them.

Your Bankcard Score

This particular credit rating model looks more at your credit card debt than anything else. It puts a greater amount of weight into your credit card repayment history than your installment loan repayment activity. This makes it a more effective scoring model for credit card issuers trying to vet you.



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Understanding Your FAKO Score

FAKO scores consist of any credit ratings that are not made up by FICO. The majority of these exist for credit score tracking purposes. You can look at the calculation from month-to-month and get an idea of how your score is progressing. Any positive or negative action will impact as such, but your rating won’t always line up with your FICO score.

There are very few lenders that qualify you based on your FAKO score. It can be a method for pre-approving prospective borrowers. However, the majority are going to request one of your FICO scores from a major bureau. So, you should not put too much weight into your FAKO score.

Some of the more popular credit-based services/websites to offer a FAKO score include:

  • Credit Karma
  • Credit Sesame
  • Quizzle

Each of these companies offer both free and premium credit monitoring services. They serve as an indicator of your credit-building progress. However, it is not enough to go on when determining whether you qualify for a major loan. You should always stick with your FICO score calculations when buying a car or home. Not to mention, the scoring zone (in points) differs and does not always follow FICO’s path.

The Problem With FAKO Scores

There are many different FAKO scores out there and there is not a universal way to calculate yours. In fact, a FAKO score could vary by hundreds of points depending on the algorithm that the calculating company uses. Any sudden changes to your credit report can have a major impact, as well.

Any prospective lender will not generally use your FAKO score. However, a bureau-based score might come into play when trying to pre-approve you for new credit. This means a FAKO score could be an initial screener and sometimes it can be used to bypass a hard inquiry. With a soft pull and a score estimate, some lenders have enough to go on to make their decision.

Here are some other issues with using FAKO scores:

  • No lenders actually use it when screening new applicants
  • The score you see could be very different elsewhere
  • Any single missing entry can severely skew your score
  • Missing a negative item could severely disfigure your perception

Basically, following your FAKO score can send you down a troubling road. It just takes one negative instance to send your FICO score dropping. However, this might or might not happen with your FAKO score calculation. You could be lead to believe your credit is still running strong — when that is not actually the case.

Credit Score

Which Credit Score Are You Getting?

The services above are all very popular and more than one-third of Americans have an account with at least one site. So it is a good idea to know the difference in credit-scoring between each of them.

  • Credit Karma offers your Equifax and TransUnion scores
  • Credit Sesame includes your Experian National Equivalency score
  • Quizzle provides you with your Vantage Score rating

You should research and choose a credit monitoring service with care. The difference in the effectiveness of your credit score estimates will follow.

Typically, your VantageScore rating will be a more accurate guess of your FICO score. But you have to take into consideration the unique information found on your file at each of the credit bureaus. Any missing positive items will hold your credit rating down on a particular report.

Understanding Your VantageScore Rating

Once upon a time, your VantageScore would make up for approximately 10 percent of your loan qualifications. It is now not so dominant, but there are still quite a few lenders that consider this score.

Your VantageScore 3.0 rating will fall in the 300-850 point range. The main calculation factors are as follows: your payment history, credit age, type, utilization, available credit, total balances and debts, and recent credit behavior.

The main difference with your Vantage Score is that you put more weight in your average credit age. This is less of a factor than your utilization rate with your FICO score, but that is not the case with your VantageScore calculation.

Here is why your VantageScore rating still matters:

  • Nearly 10 percent of lenders use it
  • Works well for ongoing credit risk analysis
  • Provides a fair calculation even without 2 years of payment history
  • Any score changes are systematically calculated with each new entry

Furthermore, there are approximately 30 million more Americans with calculable credit scores using this model over any other. This means that even thin file borrowers and people in credit despair can benefit from following their VantageScore rating.

Conclusion

There are three different sets of credit scores that exist — FICO, FAKO and VantageScore. Each are useful in their own right, but only your FICO scores will truly matter in the end. You should not get caught up in tracking the others as anything more than a general indication of your progress from month-to-month.

It is understandable that you cannot pull your report and get a proper calculation every single month. Instead, all you can do is track your report changes monthly and estimate the score impact.

Sources:

http://myfico.custhelp.com/app/answers/detail/a_id/469/~/fico%C2%AE-score-versions-included-in-your-credit-report

http://www.doctorofcredit.com/credit-scores/fako-score/

https://www.vantagescore.com/images/resources/VantageScore3-0_WhitePaper.pdf

https://www.quizzle.com/resource-center/credit-q-and-a/how-is-my-vantagescore-credit-score-calculated

http://www.myfico.com/crediteducation/how-lenders-use-fico-scores.aspx

https://blog.smartcredit.com/2010/05/01/what-is-an-auto-credit-score/