Good credit cardholders lumped in with bad
Card issuers take closer look at cardholder spending, loan data
Ask a question.
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
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.
Now, more than ever, take care of your credit!
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- How to stop collections on recurring charge reported as fraud? – Canceling a card for fraudulent recurring charges won't necessarily stop the debt from being sent to collections if left unpaid ...
- Steps to fight fraud, repair credit damage caused by ex-spouse – Sharing finances is common during marriage, but can backfire horribly when a marriage falls apart. Take steps to protect your credit and financial standing ...
- Which card issuer allows different credit limits for multiple users? – Most card issuers don't allow you to set individual spending limits for authorized users; American Express is the exception ...