topic Re: Credit Line Increase in Credit Cards

Credit Line Increase

Anonymous — Sun, 14 Jun 2020 22:33:49 GMT

I'm working on rebuilding my credit. Long story short, due to a family emergency, I accumulated a lot of cc debit in 2007 and had quite a few missed payments. At one time, I had about 10 cc and a line of credit with BoA. Due to late payments, all but one cc (Discover) was closed and charged off/paid in full. Since 2016, I've opened three new cc: Credit One Visa and Mastercaed and Merrick Bank. My UTI is: CO Visa balance-$970 with a $1750 credit limit; CO Mastercard balance-$980 with a $1700 credit limit; Merrick-$2487 balance with a $2700 limit; Discover balance-$9297 with a $9500 limit. Merrick has given more frequent CLI and CO automatically gave me CLI on both cards in April. Since April, I have reduced my balance down quite a bit. Discover has not given me a CLI in forever. I assume it is because my utilization rate is too high. I've used the card a few times and paid for those small items when it posts and then my monthly payment is automatically made each month from my checking account. I'm looking at buying a vehicle in the next several months, hopefully, so I want to pay more down on my balances. While my utlization rate is high, my DTI is low...about 8% or so. My questions are: Would Discover grant me a CLI if I request it? And is there a risk if I just pay my balances down versus charging small items to them each month? (i.e. if I don't charge anything, will they lower my limit or close the card). I feel like Discover would not grant the request. I've had that card forever and held a very high balance for a long time (I know, I know...I'm really kicking myself for charging more than I can pay for in a timely fashion). That's the longest open credit account that I have and they have obviously worked with me, during the time when I had family issues going on. They allowed me to set up automatic monthly payments, which was only supposed to be for 12 months, and here I am 13 years later still having the same payment automatically deducted from my checking account. I clearly want to keep that card and want to be able to start using it occasionally when the balance gets substantially lower, so I don't want to ruin my relationship with them. My FICO scores are 658/659 on all three bureaus. My last late payment was six years ago. One of those old cc accounts has dropped off of my reports and a couple more should drop off between now and December. My overall utlization dropped a smidgen due to paying down some of my balances, but my EX score only went up 1 point since last month, which is frustrating. I'm guessing the biggest issue with the verrrrry slow rise in my FICO scores is the high utlization rate???? Thoughts or advice?

Re: Credit Line Increase

Remedios — Sun, 14 Jun 2020 22:41:32 GMT

Honestly, I can see balance chasing here, because you're carrying a balance on that card for close to 15 years.

With that said, they can close it at any time if they start feeling that account is never getting paid.

Most lenders leave them open, as a psychological incentive to continue paying.

I'd rather take CLD if one was to happen than have it closed if they feel like this isnt something you can dig yourself out of.

CLDed card can grow again, closed account wont be reopened.

Also, at that amount, you're hemorrhaging money in interest.

Pay what you can and let the chips fall where they may.

Re: Credit Line Increase

Anonymous — Sun, 14 Jun 2020 22:55:07 GMT

You can request a Credit Limit Increase with Discover card online, it will not affect your credit score to request one, we cannot tell you whether you will get an increase.

As it turns out, your utilization probably is dragging your scores

I will say that data indicates "people who get credit limit increases tend to keep their “utilization” constant. In other words: If a person is carrying a $1,500 balance when they have a $3,000 credit limit, you’d expect them to start carrying a $4,000 balance if the limit is raised to $8,000." You may be at much higher risk of increased debt loads, especially with a recession.

Re: Credit Line Increase

K-in-Boston — Sun, 14 Jun 2020 23:02:17 GMT

I would definitely agree that balance chasing is a real possibility. But that should not be a deterrent to paying the balances down. To answer your scoring question, you are currently at 88% aggregate utilization and over 90% on two of your cards, which may very likely be costing you up to 100 points on your FICO scores compared to a small utilization amount!

I would stop using the Discover card (or any card with a carried balance) for any new purchases immediately. You are paying more (assumed much more) in interest on your new charges than you are earning in rewards, as you have no grace period and new charges begin to accrue interest immediately. I never like to suggest paying cash or debit, but with your current options, it is the best way to go.

I would focus on paying down the Merrick at least under 89% as soon as you can, and then throw anything you can toward the Discover each month while avoiding new charges on it. Once the balance comes down on the Discover substantially, you may be eligible for a credit line increase which will help tremendously. Once the balance is paid to zero, if you have a balance transfer offer on your Discover card, you can transfer the remaining balances to that card with a 3-5% fee or 4.99% promotional APR (offers vary and not everyone will get them, but if you do it would help you a lot) and stop the interest bleeding on the other cards.

Re: Credit Line Increase

Anonymous — Sun, 14 Jun 2020 23:03:30 GMT

Yes, I would definitely rather take the CLD versus a closed account. Over the course of a few years, my oldest child was dx with cancer, developed kidney failure, had a transplant and was dx with a different cancer. While we were fortunate to not have a lot of medical expenses (given all the occurred during that time), there were still some, plus the cost of gas and buying food, etc during long, extensive hospital stays and trips to the doctors. It takes no time to accumulate the debt, but it seems to take forever to pay it off. My plan is to pay off my lower two cards, while making at least the minimum payment, if not a little more, on the other two. Honestly, I don't want a CLI to charge more. I want it to lower my utlization rate; however, I know a cc issuer won't necessarily look at it that way. My other plan is to pay off the CO cards and get a cc through VACU and possibly transfer some of the balances from the other two cards. I hope by the time I get those two cards paid off, my FICO will increase more.

Re: Credit Line Increase

K-in-Boston — Sun, 14 Jun 2020 23:07:32 GMT

Very sorry to hear about the circumstances. FWIW paying down the two smaller cards will likely result in minimal or no change in scores; you are receiving very hefty penalties on the other two right now. Score optimization shouldn't be immediate goal, of course, and if there is moral encouragement from paying down the smaller cards first, then certainly do that.

Re: Credit Line Increase

Anonymous — Sun, 14 Jun 2020 23:32:56 GMT

I've only charged minimal amounts on my cards , just out of fear that if I don't use it all, they'll close them. By small amounts, I mean less than $20, and as soon as it posts, I pay that amount and use my debit card for everything else. I know that may sound crazy, but I just worry that if they close them due to no usage, my utlization rate will be worse than it is now. It was about 97% until this last month. While the percentage is still high, I'm relieved that it is under 90% and it is certainly motivating me to continue to knock it down each month. My plan was to continue to pay down the CO and do at least minimum for the other two. But you think my next payment should be a big chunk to Merrick? I have one CO that is due 6/5 and the rest are due 6/18(Merrick), 6/21(CO) and 6/23 (Discover). I've already made partial minimum payments on all three of those. CO and Merrick have lowest minimum payments ($55, $61 and $81) while Discover is $187. The Discover is killing me, which I'm sure you've already figured out. I've been torn as to which way is the best method to pay off these balances: smallest balance first, knock them down to less than 80% one by one, higher interest rate first (ironically, that is Merrick and one of the CO). Debt sucks! I forgot to add that I do have a loan through VACU, which I did through my employer. It's a small loan, $500. I guess it's like a credit builder. You can apply once every six months and as long as I'm employed and a member of the CU, I qualify and they don't do HP but do report to all three credit bureaus. The loan is automatically taken out of my paycheck every two weeks and it should be paid off in the next month. I may do another loan once this one is paid off and use that to pay towards one of the cc. This will keep a good mix of credit on my account, since our mortgage is paid in full and our car loans are paid in full, and it will add to the relationship I have with the CU.

Re: Credit Line Increase

flyingmd — Sun, 14 Jun 2020 23:36:37 GMT

Highly unlikely youll get any CLI with that utilization. And as others have said, you may very well get balance chased. While there is no risk to your score for asking, I would stay off the radar, especially on Discover and not request until you get that balance almost paid off in full. Good luck!

Re: Credit Line Increase

Anonymous — Sun, 14 Jun 2020 23:39:31 GMT

This makes sense and I completely agree because, until this month, my balances haven't decreased substantially...probably increased more once I got a CLI. Obviously I have not been invested in my credit like I should have been. I think I went so far down the rabbit hole that I had the mentality of, oh well, what's a few more charges on my card gonna hurt??? I think the other part is that I had more pressing stuff going on in my life, that great, or even good, credit if I'm being honest, was put on the back burner. Now my goal is to get my balances down and my scores up. I know it will happen in time.

Re: Credit Line Increase

Anonymous — Sun, 14 Jun 2020 23:44:35 GMT

I concur. That was my other thought...if I ask, it will raise a red flag. Thanks to everyone for your advice. All of these are valid points and things I have thought about. Sometimes it is nice to have others validate what you are thinking. I think the other frustrating piece is that my scores jumped 17 points after the CLI two months ago, which was only $200/$250 on the CO cards. I dropped my utlization to 88% by paying over $500 on my accounts this month and my EX only increased by 1 point. (Clearly patience is not my thing).

Re: Credit Line Increase

Anonymous — Sun, 14 Jun 2020 23:58:24 GMT

Thank you! I guess I was looking at it from the standpoint that if I pay those down first and make minimum on the other two. Once the CO are paid off, then I can pay what I was paying on the first two to the remaining two. Hope that made sense...it did in my head. Lol. I feel a little better now that I have those two below $1000 and the utlization under 60% because they both were much higher (at least 85%). Thanks for your advice. It makes sense and after reading this comment, I can see where I'm not making a lot of progress because Merrick and Discover still have high balances.

Re: Credit Line Increase

CreditInspired — Mon, 15 Jun 2020 02:35:13 GMT

Hi OP and welcome to myFICO

Next time, please use some returns to create paragraphs and do not bold all your text. This will make your post easier to read.

If I were you, I wouldnt apply for a CC or a CLI until you get those 4 high UT CCs to <8.9%. And nope, Disco will not give you a CLI when you're almost at 98% UT. TBH, I think you should count your blessings that they haven't closed the CC. This is just not the climate to run up charges on CCs or carry maxed out balances. It makes CCCs nervous and view this as risky behavior.

So, IMHO, since your DTI is only 8%, now is a perfect time to pay down those balances.

GL2U

Re: Credit Line Increase

Anonymous — Mon, 15 Jun 2020 04:20:27 GMT

@CreditInspired Sorry, typing this from my phone. If it was in bold then it's because I accidentally hit the bold key.

Well, the balance on the Discover card has been high for a long time, so it isn't something that just happened. Of course, this pandemic certainly hasn't helped due to the financial crisis that it has created. I've read some other forums where people have posted about their CL being reduced or the cards canceled. It is definitely a concern for me. I am fortunate that my job is an essential job and I've been working this entire time, so that hasn't been an issue. But after reading other posts, it does make me worried that they'll close my card or reduce my limit. I hope that doesn't happen.

While my DTI is low, I have other expenses that I contribute to, I'm trying to build up my savings, and while my oldest is now healthy, she still has follow up care that I pay out of pocket for. It's a hard balance. I want to put a good chunk towards my cc balances, but it seems like every time I come up with a plan, I end up having $1500-2500 in medical expenses to pay out of pocket every year and it always comes at inopportune times.

It will take me forever to get to less than 8.9%. Definitely want to be there, but it seems like it will never happen.

Thanks for the advice!

Re: Credit Line Increase

dogmeat — Mon, 15 Jun 2020 08:34:51 GMT

>> It will take me forever to get to less than 8.9%. Definitely want to be there, but it seems like it will never happen.

A plan may be helpful if it seems like forever (which it isn't).

Step 1: As previously mentioned, stop using your credit cards, immediately. Don't let fear rule your actions, you are only hurting yourself by doing so. Choose wisely.

For example (simplified, without taking into account interest).

Discover $9297/$9500, $187/mo payment (~2% of balance).

Can you up that to $250/mo payment, consistently?

$250 x 12 = $3000 paid down every year. Do that for 1.5 years and you're under 50%. 3 years and its paid off (roughly speaking).

Re: Credit Line Increase

Anonymous — Mon, 15 Jun 2020 13:08:37 GMT

@dogmeat

I agree with a plan. I do suck at making plans/lists and sticking with them. Clearly evident by the fact that I have all this debt that I am barely chipping away at over the last decade or so.

Step 1: As previously mentioned, stop using your credit cards, immediately. Don't let fear rule your actions, you are only hurting yourself by doing so. Choose wisely. Minus a few small items (maybe two of less than $20 each), I have not put anything on my cards in the last few weeks. I added those charges because I was afraid if I didn't use them, especially Discover, it would throw a flag and they would close the card.

Step 2: Figure out how to pay these down. Don't count on $1500 miracle money being available at some future date, just pay more every month, find a way to do it. Live with less, don't eat out, make your lunch or coffee at home, whatever it takes. It doesn't take much, and it adds up. I've been teleworking a lot since March 17 and until the last two weeks, our state was still in Phase I, with take out/delivery only. I live in a rural area, so restaurant options are limited unless we travel 30-60 minutes. So, eating out has dropped significantly; however, since my kids were home earlier than anticipated due to school closures, I feel like I was spending more at the grocery store. I did do grocery to go orders, which allowed me to be more aware of what I was buying and I could see what I was spending before I hit the confirm button. I wish there was miracle money! I did put my stimulus check in savings because I felt that having an emergency stash is important.

Can you up that to $250/mo payment, consistently?

$250 x 12 = $3000 paid down every year. Do that for 1.5 years and you're under 50%. 3 years and its paid off (roughly speaking).

It may also be helpful to see how much money you are throwing away in interest, as I know that's a big motivator for me. Let's say your Discover is 20% APR. 9297 x .20 = ~$1850year, ~$154/mo in interest. Most of that $187/mo you're paying on discover is just paying the monthly accrued interest, which is one of the reasons why the balance isn't moving. Up that payment, and you'll pay down principal, resulting in less interest being charged next month, and more of your (over)payment next month will thus go towards principal. It's a virtuous cycle, and likely the only practical way you'll get this debt under control. That's pretty close to my interest on my Discover card. I think the amount to interest is around that figure, maybe a couple dollars higher. I can pay atleast $250 a month towards Discover. For many reasons, I would like to be able to pay it down faster than that. 1) I'm tired of it hanging over my head and being obligated to pay for stuff I bought a decade ago (so depressing); 2) I want to save more; 3) I will at some point need another car, definitely need a new sofa and work done on our house. So, with that said, this accumulated debt is hindering my ability to put this money towards other things, whether it be savings, the house, a vehicle, etc. I can definitely pay a higher amount. I think I was caught up in paying down the two smaller balances first, then tackling the next smallest (Merrick), then Discover. Since I have the CO cards below $1,000 balance, I was thinking about making a bigger payment (about $287) to Merrick, which is due in 3 days, which will get the utlization down on that card to less than 89%. I've already made one small payment to Merrick's minimum monthly payment, so the rest of the minimum owed by 6/18 is about $54.00. I obviously want to pay more than the minimum, since most of that goes to interest. Would it make more sense to pay the rest of the minimum plus a little extra, and then make a bigger payment toward Discover? I'm kinda torn.

***I just checked my Discover statements. My interest rate is 19.9%. Seriously shocked that it isn't higher. Amt to interest last month was $154.97. Since January, the amount of my payment that has gone to interest has dropped by almost $20. Minimal progress, but I have paid a lot in interest since January. I'm really kicking myself for not being invested, sooner, in reducing this debt.

Thanks for the advice! Definitely taking all of this into consideration, as it is very helpful.

Re: Credit Line Increase

805orbust — Mon, 15 Jun 2020 13:46:49 GMT

A note on the interest thing, DO NOT put another cent in savings until you pay these cards off. Unless your savings account is giving you 20% interest, you're literally losing money by saving right now. Keep what you have in savings and divert that money to cc payments. You're bleeding money.

Additionally if you've got enough savibgs to pay all these off, do it now! You'll be saving over 20% interest and be in black ink immediately. Then take what your collective minimum payments were. PLUS your normal savings amount and put that away every month. You'll be in much better shape.

Re: Credit Line Increase

dogmeat — Mon, 15 Jun 2020 20:16:12 GMT

>> Don't let fear rule your actions

>>>> I added those charges because I was afraid

I know, I called that out. I'm suggesting you stop doing that.

>> Would it make more sense to pay the rest of the minimum plus a little extra, and then make a bigger payment toward Discover? I'm kinda torn

There is no best way, in my opinion. Or, rather, I can't tell you the best way. Here's a couple of different ways to approach it: https://www.experian.com/blogs/ask-experian/avalanche-vs-snowball-which-repayment-strategy-is-best/

What is most important is that you choose some way. Whatever that way is, it should almost certainly involve not using credit cards anymore. I suspect you may be a good candidate for physically cutting your credit cards in half and/or shredding them until you've got your debt under control. Don't get stuck in analysis paralysis. Consider your options, make a plan, stick to it as best you can. Car, couch, and house will have to wait unfortunately. Only you know your emergency fund requirements. Just know that every extra dollar you pay to any one (or all) of your cards every month will reduce the amount of interest you pay the next month, effectively "saving" you money.

Edit to add:

My posts can come off as a bit terse, so I just want to add this. You're brave for coming on this forum and sharing your situation. You're in good company. Practically everyone here has been where you are, or are there currently, and many of us are worse off. Many struggle with making plans, and sticking to them. Credit cards are so easy to use, nearly all of us have gotten into trouble with them. It's normal, it's human, and we're all human. What the experiences on this board show, and what I know from my own personal experience, is that it's fixable. Your debt numbers aren't out of control, they are totally fixable. It just takes a plan and some commitment on your part. If you're not good at doing that, nows the time to get good. You can do this, it's totally within your power and ability to achieve.

Re: Credit Line Increase

K-in-Boston — Mon, 15 Jun 2020 20:18:12 GMT

Couple of points.

The amount of interest you are paying dropped by about $20 due to recent changes in the prime rate. You have a variable APR, and since the prime rate changed your APR decreased.

The previously mentioned payoff strategy definitely did not account for interest. Paying just $50-75 more than the minimum will still require many years to pay the balance off.

You don't need to make new charges to prevent an account from being closed for inactivity if there is payment activity. My BoA Travel Rewards card hasn't seen a swipe since about 2006, but it's seen consistent payments most of those months while balances have been paid down (it's one of my primary balance transfer cards). With Discover, my card has not seen a charge in at least a year; but again payments on a promotional balance transfer keeps it open.

Definitely agree that anything you have in savings should be applied to the balances immediately. Just by paying down some of the balances you have a fair chance of being approved for more credit in the future if desperately needed, and possibly for a balance transfer card or loan with a lower interest rate than your cards.

Anything that can be done to stop the bleeding on interest alone should be done.

Re: Credit Line Increase

Anonymous — Mon, 15 Jun 2020 21:58:46 GMT

@dogmeat Thanks! I do appreciate the advice. I know what works for one may not work for others. I think I had a moment of panic the other week, when reading posts about accounts being closed. In all honesty, that's out of my control if it happens.

I always have great plans of how much I'll pay, and then something crazy happens. Never fails...every time!

I think it is easier to post on here and share with those who have been in or are in same/similar situations. Less judgment than it would be having this conversation with people I know. If I'm being honest, I've had some debt, whether small or large, since I turned 18, so maybe that's part of the reason why I wasn't stressing over getting paid it off. Hindsight is 20/20.

Re: Credit Line Increase

Anonymous — Mon, 15 Jun 2020 22:28:18 GMT

@K-in-Boston I obviously had no idea that you could keep a card open that long without putting charges on it. Learn something new every day I suppose! Honestly, once I get these balances paid down, I do have concerns about adding additional credit. I think those concerns come from where I'm at now and not knowing how many cards is too many, even if balances are $0 or super low. Is it better to have as much available credit? I know that's a long way off, but I want to have a plan and know that I'm in a good financial position.