Brent’s Credit and Debt blog

Recently, credit card companies have become real sticklers about your credit line.  In fact, they are often reducing your credit limits, as you can see in my blog entry Why Did My Credit Card Company Reduce My Credit Limit?

If you are a good customer, however, shouldn’t you be able to get your limits raised?  If you have made your payments on time, and kept your balance below your limit, your credit issuer should consider you a good source of credit, right?

Well, not any more.  Becky, who had the problem with her JC Penney card in the blog post above, just got a letter from GE Money bank.  GE Money Bank wrote to let Becky know that she would not be getting a credit line increase.  She hadn’t asked for an increase, but they thought they should tell her she couldn’t have one anyway.

Becky has been making her minimum payments, hasn’t been using the card, and hasn’t been late on a payment.  Her balance isn’t shrinking much because she is making the minimum, but that is what you are supposed to do, right?

Nope.  Now, you have to pay aggressively.  It seems that the credit card companies don’t want to see you carry a high balance any more.  That is just too risky.  They want their money paid back quickly so they can make sure your account doesn’t turn into another default on their books.

Here is what GE Money Bank said about Becky’s account:

1)      Average percentage of credit limit used on this account over most recent 3 months.

2)      Number of months this account has been open.

3)      Percentage of times payment greater than amount due over last 12 months for this account.

4)      Low ratio of payments to amount due over last 6 months on this account.

What does this mean?  Let’s take them in order:

1)      Average percentage of credit limit used on this account over most recent 3 months.

Here, they are saying her current balance is too high.  She needs to drop the balance of the account.

2)      Number of months this account has been open

The account history isn’t long enough for the creditor to feel comfortable.  Becky has had the card for about 18 months (she got it before Christmas 2007).  They apparently want more of a credit history than she can offer.

3)      Percentage of times payment greater than amount due over last 12 months for this account.

Becky has been making minimum payments to prove she will always pay on time and that she is a good credit consumer.  Apparently, giving a creditor a lot of interest isn’t enough.  She needs to pay more on her account than the minimum every month to prove she has the means to pay the card off faster.

4)  Low ratio of payments to amount due over last 6 months on this account.

As with number 3, they want more money.  How much is enough?  Well, 4% is about what they charge as a minimum.  I would suggest 10% as a good starting point, and you can pay a bit more or less depending on your personal financial situation.  Of course, you can always call your individual creditor and see if they will give you a percentage to follow.

As with anything else, the rules change over time.  You need to pay a bit more now than the minimum required, and you need to keep your balance lower, in order to have a good credit standing with a creditor.  Unless you do this, your chances of getting a higher credit limit are greatly reduced.