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Why You Can’t Get A High Limit Credit Card

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Have you ever applied for a credit card and ended up surprised at how low the limit was? You’re certainly not alone, because many people find themselves in this exact scenario every day. Read this blog to know what is a high-limit credit card, and how to increase credit card limit?

You might have a high income and/or a high net worth, but the limit on your new credit card might not seem to reflect that. This might not make sense to you. We’re here to explain how credit card limits are determined and discuss some reasons as to why your limit was lower than you expected.

How do banks & credit card issuers determine credit card limits?

Financial institutions use a set of complex and specially engineered statistical models to determine how high your credit limit will be. Some criteria they use include your income, your net worth, your debt balances, your credit history, your credit score, and your current mix of debt.

The actual formula used to determine credit card limits is proprietary. That is, financial institutions keep this information secret. They do this for several reasons. The first reason they keep it secret is because they’re using this formula to make the most money for themselves, and keeping this formula secret allows them to protect their businesses. The second reason they keep it secret is because they don’t want individuals or businesses trying to “game” the system. Keep reading this blog on what is a high-limit credit card.

Credit card limits are determined on a case-by-case basis. Not everyone with similar credit profiles will get the same limit. Credit limits granted can also change over time. For example, during the 2020 financial crisis caused by the This is an obvious one, but we thought it important to get it out of the way. Someone with an income of $30,000 per year is not going to get the same limit as someone with an income of $100,000 per year. Financial institutions know that your income is important to your ability to pay credit card bills.

But what if you have a high income or high net worth? Why else might you be unable to get a high limit credit card? Read this blog on what is a high-limit credit card.

Outstanding balances are too high

This is one of the most common reasons why some high income individuals are unable to get a high limit credit card. If you have a lot of debt, even if you’re able to make the payments on time, banks and other financial institutions are going to be less willing to give you more available credit.

Keep in mind that a card issuer is under no obligation to tell you why they set the limit they did. It’s up to you to look at your own credit profile and see if there’s anything you can improve on. Read this blog on how to increase credit limit.

Your credit score is too low

If you have poor credit, card issuers are not going to want to lend you much money. You’re considered high risk, and they’re not willing to provide you with a large limit if you’re a high risk borrower.

People with low credit scores also have trouble getting car loans, mortgages, and personal loans. If you want to improve your credit, but your credit score is currently low, check out our guide to improving your credit in a few easy steps!

You lack a credit history

If you’re a recent graduate working a well-paying job, but you don’t have a credit history, you probably will not qualify for a card with a high limit. In fact, you might not be able to get an unsecured card at all! Keep reading this blog on how to increase credit card limit.

If you don’t have a credit history, your best bet is to open up a secured credit card with a small limit. Use it often, but don’t go above 50% of your total limit. After about a year of using this card, you should be able to qualify for an unsecured card with a much higher limit. However, if you qualify for an unsecured card immediately, take it and use it wisely!

The economic situation is not favorable

After the credit crisis in 2008, many people found themselves completely unable to open up a new credit card for a short time. Shortly thereafter, banks were offering very small limits on credit cards and were thrifty with the loans they provided.

This is not unusual. Banks and financial institutions are businesses, too, and they react to the overall economic situation.

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Why You Can’t Get A High Limit Credit Card

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Why You Can’t Get A High Limit Credit Card

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Have you ever applied for a credit card and ended up surprised at how low the limit was?

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Jason M. Kaplan, Esq.

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The Credit Pros

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Credit Repair

Options for Student Loan Repayment in 2021

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Back in March, the US government announced that it would be suspending all payments on federal student loans. This moratorium on payments was extended until January 31, 2021.

Although we don’t rule out the possibility of this moratorium’s extension by the Biden administration, we wanted to teach you about your options for student loan repayment in 2021.

What Are My Options For Student Loan Repayment in 2021?

Income-based repayment

Income-based repayment is a great way to get started on paying down your student loans without making it impossible for you to afford basic living expenses. So what are income-based repayment programs, and how do they work?

With an income-driven repayment program, you only have to pay a small amount every month, less than your typical payment would be.The way they assign your payment amount is based on a percentage of your discretionary income. The US Federal Student Aid website defines discretionary income as “the difference between your annual income and 150% of the poverty guideline for your family size and state of residence”.

There are several different types of income-based repayment plans, and all of them will differ depending on your situation. To figure out which one is the best for you, you’ll want to apply for income-driven repayment by going here (directs you to the Federal Student Aid website).

Income-based repayment options may not be available for privately held student loans, such as loans issued by Sallie Mae.

For more information about income-driven repayment plans, go to the US Government Student Aid website.

Deferment and forbearance

After the moratorium ends, you may still be able to put your loans in forbearance. Forbearance is when you and the lender agree that you will stop payments on the loan for a set length of time (usually 3 months). Interest continues to accrue, but you don’t owe anything extra if your loan is in forbearance.

Deferment is a bit different, and usually you need to meet certain conditions to qualify for student loan deferment. Deferment is generally available to those who are current students, medical residents, or those who are working in professions such as teaching. In some situations, your interest may no longer accrue.

If you’re concerned about being able to make your payments in February, you may want to consider putting your loans in forbearance.

Refinancing or Consolidation

Many student borrowers find that their loan has an enormous interest rate, making it hard to afford the payments on them. Refinancing or consolidation can help you, providing low monthly payments with a fixed interest rate.

Refinancing and consolidation are similar, but they refer to different things. Refinancing is when you pay off one loan by taking a new one, often with lower payments and/or a lower interest rate. Consolidation takes multiple loans and bundles them together into one loan, often by using the new, large loan to pay off the smaller ones.

The US Government offers a Direct Consolidation Loan which you can apply for here. You can choose to consolidate your loans using a private lender instead. Depending on the interest rate you get and the payments you will have, you may decide to choose one over the other.

If you refinance or consolidate federal student loans using a private company, you may lose some of the benefits of taking out federal student loans such as subsidized interest rates and income-based repayment. We recommend saving refinancing for private student loans or federal loans with higher interest rates such as PLUS loans.

Learn more about paying for education in our guide to student loans!

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Options for Student Loan Repayment in 2021

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Options for Student Loan Repayment in 2021

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What are my options for student loan repayment in 2021? Read this blog as we wanted to teach you about your options for student loan repayment in 2021.

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Jason M. Kaplan, Esq.

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The Credit Pros

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Credit Score Hacks for 2021

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It’s almost time for New Year’s Resolutions, and one of the biggest ones that people have is to get their personal finances in order. One big aspect of one’s overall financial profile is their credit score. Having a good credit score means that you’ll have access to lower interest rate loans. It’s also important for qualifying for mortgages and other large loans.

If you want to increase your credit score in 2021, we’ve got just the thing for you. In this article we will be going over some things that you can start in January to help you get a better credit score in 2021.

Although these aren’t so much “hacks” as they are “strategies”, we still feel it’s important to share these ways for you to improve your credit score in 2021.

Hacks To Improve Your Credit Score in 2021

Snowball your credit card debt

Your credit card debt is one of the biggest things holding your credit score back. If you have credit card debt, it should be the first debt that you tackle, as it’s the most impactful to your credit score and could cost you many times more than the principal in interest.

One of the best ways to see early credit score “wins” regarding your credit card debt is to snowball your debt. We wrote an entire article on snowballing debt, which we recommend that you read.

In short, to snowball your debt is to focus all your debt repayment efforts on the smallest balances in order to pay them off quickly. This does two things at once: first, it lowers your monthly debt repayment obligation as you snowball your debt (even though you’ll likely be committing the same total amount per month to your debt). Second, it reduces your overall balance which improves your credit score as you pay your debt balances down.

This strategy for reducing debt is one of the best ways to boost your credit score quickly while also taking care of a nagging debt obligation.

Remember: if you’re paying off your credit card debt, you want to keep old accounts open and available to you! There’s no need to close an old credit account; instead, keep them open and have statements sent to your email every month.

Refinance your debt

If you have debt with high interest rates, there are ways that you can refinance it. Refinancing is when you take out a new loan to pay off an old one. It’s commonly done when you can get lower interest rates to refinance a loan. It’s also done when consolidating multiple loans, which is a good way to get a handle on debt payments.

Refinancing your debt won’t increase your credit score right away: in fact, it may lower it in the short term. However, there are refinancing strategies that can help you increase your credit score this year. If you’re able to make payments whereas before you were unable to afford them, you should see your credit score slowly rise.

There are many different ways to refinance your debt obligations, including your mortgage, your student loans, and other large sources of debt.

The most important thing to remember when refinancing is to consider the long term implications. Refinancing your student loans could save you thousands of dollars over the lifetime of the loan.

Get your annual credit report & dispute items

If you don’t know what’s on your credit report, you might be an unwitting victim of fraud or clerical errors made by lenders or credit reporting agencies.

In 2020, the federal government was giving out unlimited copies of your credit report to make sure that people were able to get access to their credit history during these difficult times. You can still get one free credit report per year from each of the three bureaus from https://annualcreditreport.com. Check your credit report and see what’s on it: you might be surprised.

If you ARE surprised about anything you find on your credit report, it might be time to make some phone calls. First, you’ll want to contact the lender in question to see what they have on file in your name. This alone could clear up any mistakes. Next, you’ll want to call the credit bureau that issued your report (Experian, Equifax, TransUnion). They’ll then take you through the dispute process, which can take several weeks to resolve.

We at The Credit Pros can help you with the dispute process. Learn more about how the dispute process works!

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Credit Score Hacks for 2021

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Credit Score Hacks for 2021

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It is almost time for New Year’s Resolutions and having a good credit score means that you’ll have access to lower interest rate loans. Click to read more.

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Jason M. Kaplan, Esq.

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The Credit Pros

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2021 New Year’s Resolutions For Personal Finance (And How To Achieve Them)

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Most of us have thought about or written down our New Year’s resolutions back in January of this past year… but usually have forgotten them or given up on them by mid-March. Although 2020 was a strange year (gyms were closed, many people were laid off, and a lot of us had to cancel our wedding plans) there was still room for our resolutions. No sense dwelling on the past though: 2021 is almost here! Check out this blog on new year resolutions for personal finance.

If you’re wondering how you could get started on improving your financial situation in 2021, here’s our guide to new year’s resolutions for personal finance.

New Year’s Resolutions for Personal Finance in 2021

Getting Back to Work (Or Getting a New Job)

2020 really messed things up for a lot of people. Millions of Americans were either laid off, furloughed, or found themselves temporarily out of work due to the pandemic. If you’re one of them, it might be time to take back your life and start getting back to work.

This is important, especially now, because it won’t be long until the moratorium on evictions is lifted on December 31. Worse yet, COVID-19 economic relief will end soon. If you’re currently out of work or are unsatisfied with your current job, consider adding “Get A New Job” onto your resolution list.

There are a few things you can do to get started on achieving this resolution.

  • Get your resume updated or redone. This includes your LinkedIn profile. You may be able to find free resume clinics by searching on Google, Eventbrite, or LinkedIn.
  • Set a goal to send in a certain number of applications every day. Remember: if you’re open to remote work, feel free to apply to remote postings from places outside your area!
  • Practice interviews regularly. Have someone you trust (preferably someone who has actually hired or interviewed people before) take you through a mock interview. Research questions that people are likely to ask in your field. Doing this will help increase your confidence in interviewing.

Pay Off Credit Card Debt

Credit card debt can be a serious hindrance for those trying to get themselves back on their feet financially. If you’ve dealt with an extended period of unemployment, you may have racked up some of your bills on your credit card. The interest can add up significantly!

Set a resolution to pay off a certain amount of credit card debt. Depending on your income and your current balance, you might be able to set a resolution to pay off the entire thing!

Paying off your credit card debt is an important step to take for both improving your credit score AND eliminating your debt altogether. Credit card debt is typically the most expensive long-held debt that people have, and at rates as high as 24% APR, it’s easy to see why.

One way you can get started on clearing out your credit card debt is to use a technique that Dave Ramsey calls “snowballing your debt”. We wrote an article about snowballing your credit card debt: check it out!

Build Up Savings

If 2020 has taught us anything, it’s that savings could mean the difference between financial security and financial ruin in tough times. One great resolution for 2021 is to build up your savings to a comfortable amount.

A good barometer for savings is to have at least six month’s rent saved up for a rainy day. After all, 2020 was the longest rainy day that we’ve had to live through, and it’s possible that 2021 might be no different (especially as the economic relief stops and evictions start up again!)

We understand that you might not be able to build up your savings due to your situation. If that’s you, then you might want to look at your income and your expenses to see where you could improve.

To start building up your savings, you will want to do a few things. First, look at your expenses and see what you can eliminate. Second, look at your income and see what you could do to increase it (a higher-paying job, a 2nd job, side hustles, starting a business). Third, commit to a specific amount that you want to save every month. To make this easy, you can set up your online banking to send a certain amount of money to your savings every single month.

Improve Your Credit Score

Your credit score is an important part of your overall financial well-being. Without a good credit score, you won’t be able to get the best rates on loans or qualify for a mortgage for your dream home.

To start working on your credit score, take the following steps. First, use one of many credit score tools to get an estimate of your credit score. Then, get your free credit report from https://annualcreditreport.com (this is an official US government website).

Once you’ve done this, you can start working on steps to improve your credit score.

  1. Remove fraudulent or erroneous entries on your credit report by disputing them. We wrote an article explaining the dispute process here.
  2. Settle delinquent accounts. These will stay on your credit report for up to 10 years (7 in most cases), however your outstanding balance on these and your payment history will be reflected in your credit score.
  3. Resume or renegotiate payments on accounts that are past due.
  4. Pay down credit card debt. Credit card debt (and your credit utilization ratio) is a big part of your credit score.

We wrote several guides on how to improve your credit score: here’s one that explains what your credit score is made of!

The Credit Pros offers comprehensive credit repair and credit monitoring tools to help you improve your credit score in 2021. Learn more about credit repair here!

Summary

2021 New Year’s Resolutions For Personal Finance (And How To Achieve Them)

Article Name

2021 New Year’s Resolutions For Personal Finance (And How To Achieve Them)

Description

If you’re wondering how you could get started on improving your financial situation in 2021, here’s our guide to new year’s resolutions for personal finance.

Author

Jason M. Kaplan, Esq.

Publisher Name

The Credit Pros

Publisher Logo

Source link

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