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There are a few ways to increase a line of credit, and varied opinions exist on whether this is beneficial or not for the consumer. Sometimes the issue of raising credit limit really doesn’t exist. When people have very high credit, and don’t use it often, banks or credit card companies may automatically offer a higher line of credit. If a lender doesn’t give this option, there are several methods for obtaining more credit.
Many credit card companies now have online forms that people can fill out to request a higher line of credit. When these are not available, lots of customers simply call their lender and ask for a credit increase. The lender is under no obligation to raise credit level, but many times they will upon request.
People who may not be able to exercise this option include this with poor credit scores, and those who do not possess an excellent payment history. Another consideration is the percentage of available credit the person is already using. If credit cards are maxed out or close to being full, lenders may feel concerned about offering additional credit. It’s fair to say this concern has heightened since the economic downturn of 2007/2008.
Therefore, if a person wants to raise credit limit and doesn’t have impeccable credit scores, they may need to do some work first. This includes paying down credit card balances on time, and establishing a history of always paying more than the minimum balance. Each payment should not just cover interest but should also cover some of the principal amount owed. Clearing up other “dings” in credit history may be helpful too. After about three to six months of reliable and larger payments, a lender may be willing to increase available credit.
Occasionally, lenders will offer new cards with balance transfer options at low interest rates. It may help to switch cards if available credit is low. Lenders may offer a higher line of credit than a current card does when a switch is made with a balance transfer. Consumers should verify that this results in more credit before making a switch.
People who want to raise their credit limit are generally interested in knowing if this will positively or negatively impact credit rating. This really depends on how the new limit is treated. High limits can be great if they are not used. People should aim for the smallest debt to credit limit ratio, and a higher limit can mean a lower percentage of available credit is used. In percentage, it’s recommended people use no more than 30% of available credit, and lower percentages are better.
As an example, a person with a $10,000 US Dollar (USD) line of credit should have no more than $3000 USD in debt on the credit card. This means that currently 30% of available credit is in use. If credit limit increases to $15,000 USD, then there is some advantage when debt remains the same. Suddenly $3000 USD owed means people are only using 20% of their available credit.
On the other hand, when debt increases with credit limit, this will negatively impact score. If the purpose of raising a line of credit is to increase debt, it will cause a lowering in score until the debt is paid off. Those wishing to raise their limit in the hopes of raising their credit score need to bear in mind that a higher limit is only beneficial when it doesn’t become extra debt.
Crispety-The home equity line of credit is a revolving credit line that works like a credit card and your payments schedule begins when you begin withdrawing money.
The terms are at a variable rate and when the prime rate goes up so does the interest rate that you are charged. The home equity loan is a fixed rate loan for a predetermined amount.
This offers a systematic bill like a mortgage at the end of each month for the term of the loan. The terms usually range from ten to fifteen years and can be renewed thereafter.
However, the home equity line of credit offers the lowest payments and interest rates because this loan is based on
interest only while the home equity loan is both principle and interest.
An average home equity line of credit might offer a 4% interest rate while a home equity loan might offer a 7.5% or higher interest rate for the same amount of money.
This is why many people go with the home equity line because the interest rates are very low and they hedge their bets that the interest rates will continue to stay low.
Sneakers41-While that is true that you should never use your home to pay off credit card bills, I do think that getting a line of credit on a home loan can be beneficial.
If you are making improvements to the home the cosmetic changes will add comfort to your home and raise its market value. Sometimes these changes to your home are less expensive then selling your home to find a larger one.
More people are looking for this option. If you want to find the best home equity lines of credit rates you should go to Bankrate which offers the national and state average home equity rates so that you can compare.
The home equity line
of credit and the home equity loan are both taking out equity of your home, but the terms and rates are very different. The home equity line of credit calculator on Bankrate can tell you how much of a line you can afford and what the payments would be like.
Bhutan-I agree. Some people make the mistake of taking out a line of credit home loan in order to paying off their credit cards.
While it sounds logical it really is not a good idea because credit cards are considered unsecured debt and a home equity line of credit or loan is secured debt meaning you are ensuring payment of the loan with an asset and in this case it is your home.
Unsecured debt like credit cards do not allow credit card companies to take your home. They can sue you for the amount that you own, but if you file bankruptcy they will not get any money.
With a recourse loan, the bank will take your
home and make sure they get payment which is why it is very risky to swap unsecured debt with secured debt. It is far better to work out a payment plans with your credit card companies rather than put your home in jeopardy.
Usually the people with the best credit have their lines of credit rates automatically extended because they have proven that they are credit worthy and will pay back the money owed.
If you need more credit, another option is to apply for a home equity line of credit. A home line of credit is a lien against your primary residence, and in return the bank will allow you to borrow money against the equity of your home.
This should be done with thoughtful consideration because should your default on the loan and become unable to pay the remaining loan, the bank will take your home.
In addition, equity line of credit loans are recourse loans which
mean that in addition to you losing your home, the bank can sue you for the remainder of the loan balance even though you lost your home.
Unlike a traditional mortgage that does not have a recourse action, home equity lines or loans do and should only be taken out for important reasons.
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