What Are the Most Common Reasons Credit Limit Increase Requests Are Declined?
After the financial crisis of 2008 and 2009, most banks are a little more cautious when evaluating credit they offer consumers, including credit card debt. When you request a credit limit increase from your credit card provider, your current debt-to-income ratio and your projected debt-to-income ratio after the increase are considered. While raising your credit limit is a good way to boost your credit score, it may not prove to be so easy.
If you are declined for the credit limit increase you have requested, consider submitting another request for an increase to a lower amount. Sometimes, the credit card issuer counters your request and offers a lower credit limit that it supports. Alternatively, you may seek out a credit card issuer that can offer you more lenient terms.
Key Takeaways
- Credit limit increase requests are determined by a complex algorithm based on your personal credit history and income compared against the credit company’s tolerance for risk.
- Paying cards on time and keeping utilization low is a good way to build credit trustworthiness over time.
- Depending on which credit company you make the request to, they will either perform a hard or soft credit inquiry.
- Most credit card companies will not adjust your credit limit more than twice a year.
- Review a company’s decision not to grant an increase and work towards eliminating negative marks on your credit report.
Understanding the Most Common Reasons Credit Limit Increase Requests Are Declined
The issuer looks at your past payment history with both its institution and any others you have held an account with by pulling and reviewing your credit history report. These play an important role when the credit analyst with the card issuer reviews your request for a credit limit increase. The analyst determines whether to approve your request by comparing these factors against the lender’s guidelines to create a risk assumption.
Many consumers are turned down for a credit limit increase due to insufficient income. The credit card issuer wants to see an income that can reasonably support the amount of credit requested. For example, if you only make $20,000 per year, do not expect your credit limit to be increased to $15,000.
A credit card company will either use a hard or a soft inquiry to determine if they are able to offer a credit increase.
Although you as a credit card holder are the one generating your risk report, the determination is always down to whether the credit card company believes that your credit increase is worth the risk. Since you are a customer of the company, they want you to use the card as they are able to charge you an interest rate on purchases and advances. However, you need to be able to pay that amount back, as a default on your credit not only affects your credit score, but the company will need to write off that debt as a loss.
Usually, the reason a credit limit increase request was denied is given to you by the credit card company. You may already be exercising too much debt or you have a history of late payments. The company will view you as a higher risk if you have blemishes on your credit report that show you are not able to make timely payments.
Avoid Defaulting
One of the most detrimental marks on your credit report that would result in continual denial of a credit line increase is if you have defaulted on a card in the past. This is a red flag for the credit card company and it will be hard to obtain additional credit if a default exists on your report. The good news is 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 have them remove the account from your credit report.
Credit Limit Increase Denied Questions & Answers
The reason you might be denied a credit limit increase is something that is highly personal. If you find yourself being denied, you should ask the lender why. They will either discuss this with you over the phone or, more commonly, will send a letter listing the reason for your denial. However sometimes this leaves you with more questions than answers.
Why Would I Be Denied a Credit Limit Increase?
You could be denied a credit limit increase for many reasons, such as defaulting on a card, having a history of late payments, recently were given an increase, too low of a credit score, too little credit history, too many recent applications, and too low of verifiable income.
How Does Asking for a Credit Limit Increase Affect My Credit?
If the credit card company you request the increase from performs a soft credit inquiry, it will not affect your credit in any way. If they company performs a hard inquiry, that 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 hard inquiry, if you are approved for the credit increase and do not make additional charges, you could lower your overall credit utilization which would increase your score over time.
How Often Can You Request a Credit Line Increase?
You can in theory request a credit limit increase whenever you want. Many issuers allow for electronic increase requests from their website portals. What is more common and what is frequently mentioned by the credit card companies is that is most advantageous to make requests about every six months, or if you have a significant increase in salary.
The Bottom Line
Requesting a credit limit increase is common practice, especially if you are new to owning credit cards and find yourself below the average credit limit (around $30,000). Make sure you understand why you might be denied an increase and work to address those factors before applying again as in some cases, repeated applications for increases can have a negative effect on your credit score.
