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How to Increase Your Credit Card Limit

Credit cardholders sometimes feel that they need to increase the credit limit of their cards. This is probably because they actually prefer to purchase more stuff using their cards. Other cardholders say they feel like they have more freedom when using their credit cards to spend and would like to increase their credit limit to allow them to buy more goods. There are procedures to follow in requesting for an increase in your credit card limit, but there are several things to consider before you file a request to increase your credit card limit. 

Timing is an important consideration

Application For Credit APPROVEDIn the credit card business, the usual practice is to grant credit limit increases only to cards that have been used for at least six months. If your credit card has been in use for less than six months, there is very little chance for your request for increase in credit limit to be granted. If your card has been in use for only 5 months, it is advisable for you wait for another month before making a request to increase your credit card limit.

The Reason for Increasing Your Credit Limit

It is important to determine why you need an increase in your credit limit because you will surely be asked to explain the reasons for your request. One of the valid reasons for increasing your credit line is additional income. When you have more money to spend, it is natural for you have a higher credit limit.  When you apply for an increase, you will be asked to justify your request so you should be ready with facts and figures to support your request. Your best justification is your credit history or good paying habits and the satisfactory way you have so far managed your credit card account.

Asking the Credit Card Company for Approval

The only way to increase your credit card limit is to convince the company that you need one. When requesting for the increase, you must be firm in your decision and be frank in informing the company you will be looking at other options if your request is denied. You can mention that you might be forced to do a balance transfer in case you are not given an increase in credit limit. If you have been a good paying customer, there is no reason why the company will not approve your request. The important thing to remember is that you should ask for a reasonable credit limit increase based on your history of using the credit card.

Ask for the Credit Limit That You need

Usually, an increase of 10% over your last credit limit will suffice; but you can ask for a bigger increase if you really need it. You can ask for a 25% increase but this is probably the highest increase that any company will approve.  Requests for increase of credit card limit higher than 25% are seldom granted by credit card companies.  On the average, a 15% increase is an ideal figure that can be easily negotiated.

Questions About Your Credit Score

Do Cell Phone Payments Effect Credit Scores?

Strictly speaking it does. As a general rule, not by much. But there are exceptions. Below are a few scenarios that should prove useful.

Does My Cell Phone provider Report My Defaults?

Here is the thing, technically speaking, creditors can report any default to the credit bureaus. But this is not always the case. A credit bureau can choose to include the information or not. Even if the information is not found on your credit score, it does not mean that the same is not considered. Remember, you may know the broad strokes of how credit bureaus make their computations, as well as the 5 main categories for consideration. But in large part, you have no idea about the details. Bottom line is, better not take the chance.

Questions About Your Credit ScoreScenario 1: One Time Default

A one-time default may not cause so much irritation that your cellular phone provider will report the same. This is especially true if the amount is negligible. The problem is, if the amount is substantial. In this case it would be better to contact your cell phone provider and reach an accommodation regarding payment.

Scenario 2: Credit Card

If your cell phone payment is tied up with your credit card, and you fail to pay the credit card company on time, then you can be sure that the default will be reported. Remember, a credit card is convenient, provided you are paying on time and in full. The problem starts when you default on payment and/or pay the minimum.

Scenario 3: Repeat Defaults

Repeated defaults on your part will may force your account to be reported to the credit bureaus. To put things in perspective, it does not mean that the same will be considered. Even if it does, there isn’t going to be much weight placed on a few cell phone defaults, especially if they are isolated cases. The problem occurs when your credit card default is on top of other defaults.

How to Check?

Aside from defaulting and looking at your report, which is a bad idea, you can try to contact your lender. Ask if they report the defaults or what circumstances warrants the default information being reported.

How to Avoid?

The simple answer is to pay your bills on time and in full. Below are a few suggestions that can be helpful:

  • Auto Debit: Most bank accounts allow the consumer to auto debit the payments monthly. Of course you want to check regularly to see that your payments are not becoming too steep.
  • Pay a few days in advance. You will be surprised at just how many times a consumer defaults because he/she forgot! You can prevent this by having a payment calendar.
  • Get a prepaid account. If you continually default on your cell phone bills, you might consider converting to a prepaid account. This way even if you default, the same does not get reported. You do however lose the ability to make calls, sms, tweets, etc, until you reload.
Getting Your Credit Score

Who Calculates My Credit Score?

Credit bureaus otherwise known as credit reporting agencies, calculate credit scores. But what exactly are they? How exactly are the scores calculated? Below are a few important facts and FAQ’s about the same.

What are credit bureaus?

These are private entities operated for profit. Their business is to collect consumer credit related information, collate the same in a report, and make the same available to the public in general. These entities also provide a computation of information based on their reports. This is called the credit score.

Are they part of the government?

No they are not. Credit bureaus are strictly privately owned. They do not exercise any governmental or quasi governmental functions.

How many credit bureaus are there?

It is almost impossible to know. Needless to say, there are many credit bureaus out there, each with their own report and score. The smaller reporting agencies are called micro bureaus, and are usually tied up to a specific lender.

What are the top credit bureaus?

There are three that come to mind. These are Equifax, Experian, TransUnion. Bear in mind that the word “top” is only indicative of their wide range, popularity, and ease of access. It does not mean that they are more accurate than other bureaus.

Who makes my credit score?

The popular misconception is that the credit bureaus make the credit score of a consumer. In reality it is actually the consumer that makes his/her score. It is only up to the credit bureaus to collect the information and calculate the same.

What is a FICO Score?

FICO stands for Fair Isaac Corporation. The same is regarded as the most accepted scoring model. This serves as the basis for most credit bureaus. The operative word is “basis”. This is because each credit bureau usually modifies the same. The modification of the model as well as the exact computation is based on the target market or audience of a specific credit bureau.

How do they calculate the scores?

The exact formula is unknown. This is because each credit bureau keeps it a secret. However it is accepted by most that there are 5 main categories for determining a credit score. These are:Getting Your Credit Score

  • Amount of debt: The total amount of debt vis a vis the total net salary determines the positive or negative points that is assigned to a consumer.
  • Credit utilization: Each consumer has a credit utilization limit. The common example of the same is the credit card limit. The nearer the consumer is on that limit, the lower the score. A good rule of thumb is not to exceed 30% of the credit utilization ratio.
  • Types of credit: Creditors like to see different types of credit facility. This means that there are a lot of entities that like to deal with the consumer.
  • Credit applied for: This is sometimes called credit inquiries. The more hard inquiries the lower the score.
Credit Cards for Different Credit Scores

Top Five Credit Cards for Small Business

When you’re managing a small business, you should choose credit cards that are useful and suitable to your needs. You can use credit cards to segregate your business expenses from your personal expenses. You may use a separate credit card for your business expenses like travel and other incidental expenses and use a another credit card for your personal expenses. Your small business usually spends sizable amounts for purchasing various items and also spends much for your travel to different business destinations. You should choose the credit card that offers rewards and bonuses for such transactions. Here are the top five credit cards that are suitable for small businesses:

Credit Cards for Different Credit Scores1. Chase Ink – There are two kinds of Chase Ink cards to choose from, the Ink Cash and the Ink Classic. Both cards entitle you to a two hundred dollar bonus when you spend $5,000 on your first 3 months of using the card. They offer bonus points that can reach up to 5% of your total purchases. The points awarded are convertible to gift certificates which you can use for purchasing items needed in your business.  They also offer 5% rebates for office supplies and telecommunication expenses, 2% for gas and hotel expenses, and 1% for all other expenses. This is among the top five credit cards especially for those who travel often.

2. Starwood American Express Business Card – If you do a lot of travel in your small business, this is an ideal credit card for you. They award bonuses by points and are very generous in awarding points when the card is used for hotel expenses. You get a rebate of 0.25$ for every dollar you spend and they waive the annual fee of 65$ on your first year. They also award a 500-dollar bonus signup making it one of the most suitable business cards for small businesses.

3. Capital One Spark Miles – This is another travel card that is right for small business. This card offer 2% rebate on all purchases and can be used for hotel, gas and airline expenses. They offer $100 dollar signup bonus if you spend $1,000 on your first 3 months of using the card. They also waive the 59$ annual fee.

4. The Plum Card by American Express – If your business requires you to purchase lots of sophisticated goodies, this card is most ideal. With this card, you can get a 1.5% discount for all your purchases if you pay early or you pay no interest if you pay within 60 days.  They charge customers with an annual fee of 200$ but it is waived on the first year.

5. TrueEarnings Business Card – This is a Costco membership card that entitles you to 4% rebates on gasoline expenses and 3% on restaurant bills payable by American Express.  You are also entitled to 25% discounts for purchases from selected sets of vendors like FedEx, Hertz, and JetBlue. This card does not charge any annual fee and have been cited by many as one of the top five credit cards for small business.

Credit Card Fees

Typical Hidden Fees with Credit Card

Credit cards can be quiet tempting and they provide flexibility to your purchasing and freedom on availing certain services you cannot readily afford. However, you should still be cautious on using them, especially if you’re not still savvy since purchases automatically represent certain charges and interest rates. There are typical hidden charges that must be examined such as the following:

  • Teaser fixed rates. Cards offering low or 0% interest rates are really tempting and are really designed to lure you. But these rates are not permanent and could only last for few months. After a certain period, you might be surprised of the charges that will be on your account.
  • Unessential insurance. Insurance relative to your credit card charges up to $50 but this will definitely not be useful in case your card is stolen. As a matter of fact, in the United States alone, there are federal laws at present prohibiting the issuance of this insurance to borrowers.
  • Interest rate and late fees.  Missed payment will incur interest rates which eventually may yield to an increase rate, especially for credit companies which raise them without even a warning.  Because of this, hidden costs are produced which add up to credit balances.
  • Credit Card FeesLate payment fees. There is a regular day and month for paying your credit cards, but there are companies not specifying their due dates and will just inform you right on that date or after. There are also those which are delayed on delivering bill statements. Late payments are charged from $25 to $50 thus it’s not really comforting at all.
  • Balance transfer charges. Companies are claiming that they are giving a low or 0% interest rate on balance transfer when in fact they are giving a fee of as much as 3% of the total amount of the balance you transmitted
  • Fees for maxing out. There are companies which approve transactions even if your card is already over its limit. In the end, you will be charged with penalty for maxing out. Another common instance is a customer who applied for a balance transfer without knowing that it will be transferred to a low rate card which has already reached its credit limit. The result? An additional penalty equivalent to late payment.
  • Fees for being inactive. Deciding to stop using your credit card might not be a good choice after all since some companies charge individuals who haven’t using their cards for 6 months or more. This is especially true for customers who do away with purchasing when on vacation abroad. Charges start with $15 so it will be safer to swipe your card on small purchase just to prevent additional charges.
  • Closure charges. Closing your account will still bear you up to $50 fees especially if you are still under contract with the card issuer. This may seem harsh but it’s one of the blatant practice being done by most credit companies to avoid account closure and loss of credit card customer.

There are really some companies which have the tendency to hide charges and change their policies irregularly, thus an end result will be accumulated debts for a certain period of time. To counter these hidden charges, read the detailed breakdown of your credit card policy and ask questions right from the start.

Credit Score Questions

Who Uses Auto Insurance Score?

Insurance companies today use a new numerical point system called auto insurance score to determine if they will issue insurance coverage on your car. It also determines what premium rate they will charge you if they decide to undertake the risk. Don’t blink now but under this new scoring system, you may end up paying higher premiums for your auto insurance even if you have an unblemished driving record. Here’s why.

In the past, your car would be automatically slapped a higher premium if you have previously figured in a car accident where you are at fault, or if you have incurred speeding tickets or other traffic violations the previous year. On the other hand, a pristine driving record meant lower insurance premiums then. This is no longer the case with the new system.

The Evolution of Auto Insurance Score

In the past, your auto insurance premium was calculated based on age, driving history, your vehicle type, where you live, and the car’s safety rating with your driving history having a profound effect on the final premium. But since various studies have shown a Draconian relationship between the credit report information and the insurer’s risk of loss or profitability. Soon enough, insurance companies adopted a credit-based scoring system which is not only based on the previously mentioned factors but also on information appearing on your credit reports.

By 1990, the new credit-based scoring system started to be used throughout the auto insurance industry to develop a more accurately predictive picture of a client’s risk profile. Insurers found it especially useful in determining rates on policies where there are no records of any insurance claims or where the owner has a pristine driving record. Industry wide, it was widely used as the basis for determining whether an auto insurance policy should be issued or not and in many instances in setting the insurance premium rate.

Auto insurance Scores are different from Credit Scores

Credit Score QuestionsDo not confuse a credit score for the auto insurance score. They are totally different from each other despite the auto insurance scoring system taking into account certain information from an individual’s credit score. Credit score is meant to gauge the credit worthiness of an individual and is used mainly by banks and other lenders in deciding the fate of credit applications. The scoring system for auto insurance measures the profitability or probability of loss on every risk undertaking relative to each individual auto insurance application.

Auto insurance scoring models differ from company to company since each insurer has its own proprietary formula or algorithm. The details of are kept away from the consumers and are considered as well-guarded corporate secrets. That is why there is very little that is known about the auto insurance scoring system except the fact that it now includes certain credit report factors in combination with insurance claim statistics and profitability data to determine the likelihood of an applicant figuring in a car accident or making an insurance claim in the future..

Who uses Auto Insurance Score

A study conducted by the Federal Trade Commission released on July 24, 2007 acknowledged the fact that credit-based auto insurance scoring system can indeed accurately predict the total cost as well as the total number of claims consumers file. While this may be of help to insurance companies, the benefit it provides consumers is highly controversial and the subject of a continuing raging debate. In Hawaii, the use of credit based auto insurance scoring system has been banned. Other states have attempted to follow suit but have failed.

But whether or not its use can produce a better match between the insurance cost consumers pay and the entailing risk of loss insures have to undertake, the new auto insurance scoring system continues to be the standard based on which insurance policies are issued or denied.

The Auto Insurance Score is currently being used by all insurance companies, the credit bureaus, the Insurance Information Institute, and the American Academy of Actuaries.

Will Getting a Credit Report Lower My Credit Score

Why is My Vantage Score and Trans Risk Score Different?

Trans Risk Score is the proprietary scoring model supplied by Trans Union, one of the three major credit bureaus in the country. It is based on the traditional credit scoring methodology which gives weight to conventional credit factors in calculating the scores such as length of credit history, debts, payment history, number of recent credit inquiries, and credit usage.

On the other hand, Vantage Score is what has been dubbed by its creators as the next generation credit scoring model. Vantage score was created by the three major credit bureaus namely Equifax, Experian, and Trans Union in collaboration with each other in an attempt to come up with a consistent scoring model as well as to veer away from the use of old credit scoring models which gives more weight to credit history.

It is also an attempt by the 3 credit bureaus to develop an alternative method to the FICO scoring system which is widely used by banks and other lending institutions to assess the credit worthiness of consumers. FICO scoring was introduced in 1986 and immediately became the industry standard for objective credit scoring. The 3 CRBs have to pay a license to be able to use the FICO model. Unfortunately, the adoption of the FICO scoring system by the three credit bureaus resulted in 3 slightly different credit scores from the 3 major credit bureaus. This created widespread confusion among consumers and the 3 CRBs wanted to address the problem by offering Vantage Score.

The Big Difference between Trans Risk Score and Vantage Score

Will Getting a Credit Report Lower My Credit ScoreThe main difference between Trans Risk Score and Vantage Score is on which credit element each of them gives more weight to. Trans Risk is a traditional scoring model which gives more weight to the length of the credit history of the consumer while Vantage Score gives more weight on his most recent credit transactions than the length of the credit.

This alone creates a big disparity between the two scoring systems your credit score falls in different national percentiles with the two scoring models. Vantage Score is able to efficiently score more consumers than Trans Risk to include the upstarts with short credit histories.

Another difference between the two scoring models which often leads to confusion among consumers is the numerical ranges of their scores. And because they use different formula, even if applied to the same set of data, they will spew out two credit scores which are totally distinct from each other.

Trans Risk Score ranges from 300 to 850  with the 300 to 600 low range considered as high risk; 600 to 700 medium range as credible; 700 to 850 high range as highly credible.

Meanwhile, Vantage Score ranges from 501 to 990 and is divided into 5 divisions. The 501 to 600 low range is considered high risk and assigned the letter F; 601 to 700 is considered non-prime and assigned the letter D; 701 to 800 is considered prime and given the letter C; 801 to 900 is considered prime plus and assigned the letter A; finally 801 to 990 is considered super prime and assigned the letter A.

FAKO versus FICO

With so many credit scoring models available today, experts in this field have conveniently segregated them into two namely (1) the FICO or the credit scoring models that subscribes to and adheres to the FICO credit scoring models and (2) FAKO or the credit scoring models that uses a system other than FICO.

FICO remains to be the standard for credit scoring since most banks and lending institutions use them up to today. The FICO score is what matters most to consumers since it what the lenders refer to when they apply for a loan or a mortgage. In short, FAKO credit scoring models which include both the Trans Risk Score and Vantage score are at best misleading and unreliable for now.