A while back, a student of mine called into my one-on-one Q&A session with a problem: She’d unexpectedly had her credit card limits reduced, which affected her debt-to-limit ratio, which in turn caused her score to drop.
Credit card companies do this regularly—they promise you a big limit, and then a few years later, they lower your limit out of the blue. This hurts your credit score, which is in part based on the debt you carry as a percentage of a limit.
In fact, 30 percent of your credit score is based on the debt you carry as a percentage of the limit.
For instance, let’s say you have a $5,000 limit and a $1,000 balance. Your balance would be 20 percent of your limit, which would be looked upon favorably by the credit-scoring bureaus.
But if the credit card companies went and dropped your limit to $2,000, your balance of $1,000 would be 50 percent of your limit, which would be looked upon negatively by the credit-scoring bureaus.
The credit-scoring bureaus will respond most favorably if you never carry a balance higher than 30 percent of your limit. So if they drop your limit, watch out! Your credit score will drop, too.
Well, like I said, this happened to one of my clients, and I told her how to fight back. Then I got this letter (which I’m editing slightly so that you have the complete context):
“I had one card with a limit that had been lowered, and I decided to try to get it raised a second time. The credit card company refused my request the first time, so I called back. After spending 1.5 hours on the phone with five or so people (who by the way, got a little more patronizing each time they transferred me to someone new), they still would not do it.
“But … during the conversation, one of them mentioned something about calling the “Portfolio Risk Department.” After just five minutes on the phone with ONE person in the Portfolio Risk Department, they restored my full credit limit! Done!
“I never would have known to even try this if not for your fabulous program and awesome encouragement! Thank you so much once again!”
At times like this, I love my job more than usual. I’ve said it before: Your credit score is your financial reputation, and I’m tickled pink to help people fight back when their reputations are being tarnished!
So if you need to increase your credit limit, call and ask for the Risk Department. Let them know your credit score is being adversely affected.
With that in mind, let me know if you have any questions about rebuilding your score. From time-to-time, I answer them in my weekly email/blog. Leave a comment below, and I’ll try to answer it in the coming months.
Category: CREDIT BLOG
Did You Hear How Tony Raised His Credit Score in Three Months, by 720 Credit Score
Every other week, I hold a question-and-answer session for the students in my credit-education program. Usually, I help people with their specific credit situations, give advice, and answer questions about the program.
The other week, though, I was fortunate to have Anthony join the call.
When Anthony started my program three months ago, his credit report was peppered with collection accounts and a judgment, so his score was about 580. To give you an idea of how that fares, anything below 620 is considered bad credit. So Anthony was considered the highest-risk borrower.
But today, just three months later, his score has jumped 60 points.
I tell my students that they should usually expect to wait about six months before they start seeing a significant jump in their credit score. But Anthony has followed all of my advice to the letter. And his score is on its way up, and fast.
Here’s how he did it:
First, he got a secured installment loan from a credit union. He was denied a few times, but Anthony was persistent. Finally, he found a credit union (Cal Coast) to give him a $600 secured installment loan. He put this $600 into an account at Cal Coast, deposited another $6 to cover the fees on the loan, and he uses the account to pay off the loan–$101 a month for six months.
This is a great tactic because it means the credit unions have no risk—after all, he’s keeping the money in the bank. And it helps you, the borrower, increase your credit score by paying the installment loan on time.
Anthony has made just three payments, and his score is already on its way up.
He also opened three new secured credit cards. He keeps a balance on these cards, but only so that they remain active, and he pays his bills on time.
“It’s amazing how simple it is once you know the rules,” I said to Anthony. “If you don’t know the rules, though, it’s just unfair.”
And that’s when Anthony said something that was my favorite part of the call. He said, “If you take the emotion out of it and you take it for what it is—a numbers game—then you see that there are tactics to it. I appreciate that. We can attack our credit scores more strategically rather than getting tied up in the negative emotions of it.”
Anthony said this perfectly. We get so scared about finances. We get this awful, pit-of-the-stomach, all-consuming feeling.
But if we are strategic and rational, rather than panicked and reactive, we get results.
Sixty points in the first three months! I can’t wait to see what happens to Anthony’s score in the next few months.
If you are feeling scared about your credit score, leave a comment below. Get your fears out of your mind. When you put the fear aside, you can start working on the solution.
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