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Old 11-12-2008, 10:06 PM   #25
NorCalCoug
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Quote:
Originally Posted by ERCougar View Post
What about applying to increase your credit limit? I have an AMEX balance that is at 3.99%, so I haven't bothered to pay it off. I opened the account when we had an emergency in residency and I've just been paying minimum payments since then. They recently informed me that they have decreased my credit limit on the account (meaning I now owe about 80% of my limit); I called and they couldn't give any reason. I wouldn't care, except that we're about to buy a house in the next few months and I would like my credit rating as high as possible. I have a higher income than they think, so I'm sure I could qualify for a higher limit and I've never made a late payment. Does it hurt your credit score to apply for an increase in limit? If so, which is worse--high debt-to-limit ratio or applying for an increase?

By law (Reg B) they have to disclose the reasons for adverse action within 30 days. The only time that this isn't required is if you are in "breach of contract" - in other words delinquent. If they can't give specific reasons then they are out of compliance. This will typically happen in one of two ways:

1. Specific adverse actions are disclosed in the letter informing why they reduced your line - FAR more common b/c it is a much better customer experiance (well given the circumstances ). These adverse action reasons come from the credit scores or criteria that are used in targetting you for the action. For example, if they use FICO then there are certain variables in the model that carry the largest weight in your score being what it is and there is verbiage that corresponds with that (reason codes). When credit bureaus send a credit score it is usually accompanied with the top 4 reason codes associated with why that score is what it is.

If this is the type of letter you received and they did use a bureau score like FICO then to be FCRA compliant there would be contact information for the bureau they used so you could dispute any incorrect information on the bureau that may have led up to the score being low and hence a line reduction.

2. On rare occasion they will state in the letter that you are entitled to have reasons for adverse action disclosed to you within 30 days if you submit for it via letter or call. This isn't too common as far as I know but some do it.

3. The only exception as I said is if you were in "breach of contract" or delinquent. Banks aren't required to disclose reasons in that scenario so your letter would cite delinquency or breach of contract as the reason.

Sorry if this is confusing but I'm trying to explain it in a very simplistic way.
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