Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com.
Dear To Her Credit,
I recently called American Express to ask for an increase in
my credit limit on one of their cards. I have had an account with them since
1985. I pay off the card every month. There have been no late payments. My FICO
score is 784.
American Express denied my request for a higher credit limit
because our mortgage is with Bank of America, a bank they say has a high rate
of people who default on their loans. My husband and I have never been late.
What do you make of this? How can I be denied credit just because Bank of
America is having financial problems? -- Debbie
Dear Debbie,
First,
I wouldn't take it personally if you can't get a credit limit increase from a
bank right now. Wayne Sanford, credit expert and owner of New Start Financial
Corporation says, "Banks are pulling back more than
ever before to limit the amount of risk that they have, so even perfect payment
clients may be refused. Unfortunately, we are at their mercy."
It
does sound ridiculous to limit your credit because other people with the same
mortgage company have been defaulting. What difference should that make? A
person starts to wonder what else they're looking at. Do they notice how old we
are or what car we drive, or how often we eat out? What if other people in our
age bracket are a bad risk?
There
is a limit to the information they can use to make credit decisions,
fortunately. "They can only use financial information to make those
decisions," says Sanford.
The term "financial information" covers a surprisingly broad area,
however! Of course the Federal Trade Commission prohibits lenders from using
information such as race, gender, religion and other personal data when they
make these decisions. They can use what
and how much you buy to assess your risk of default. "They collect data
that can tell what areas of interest you buy (restaurants, gas, etc.) and then
if they compare the clients who buy in certain areas and see what the level of
delinquencies are, that could also be a factor," says Sanford in an e-mail.
On
the other hand, lumping you together with other people who use the same
mortgage bank seems such a stretch that Sanford wonders if you may have spoken
to a new customer service representative who didn't know what she was talking
about. There's no harm in calling again and asking to speak to a supervisor in
the credit department. We've all received false or incorrect information from customer
service representatives. Sanford says, "If she has good payment history
and has been with them for a while, and has not asked for a credit line
increase in 12 months, they should provide her with a small increase at least."
If
American Express still won't give you a credit increase, ask for the credit you
need elsewhere. The good news is that, even by their admission, there's nothing
wrong with your credit history or credit score. There's nothing you can do to
fix it, short of changing mortgage banks, and that would cost far too much. You
can find banks that are happy to extend credit to you, even now.
Times
have changed in just the past six months. The fact that American Express and
other banks are limiting accounts for people like you with perfect credit and
decades of good payment histories is evidence of that. Be thankful your credit
is in good shape; a credit crunch may be inconvenient for you, but it's
disastrous for people with marginal credit histories who often use credit to
pay for everyday living expenses.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: March 6, 2009
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