Credit card limits up. New applications rejections up. Here’s why.

With the holiday season in full swing, more shoppers are asking for higher credit limits as lenders get stingy with issuing new cards, experts say.

New York Federal Reserve also sees an increase in application and approval rates for credit card limit increases Said last month. On the other hand, although credit card application rates remain strong, the number of applications being rejected is increasing.

Brandon Robinson, president and founder of JBR Associates, which specializes in retirement strategies, said, “Post-COVID-19, inflation and interest rates have spiraled out of control, and people have been forced to make emergency repairs to get their car done or buy a gift.” Funding has decreased,” he said. His credit card usage increases to the point where he’s well over 30% or even 50% of his credit card limit, and his credit rating has dropped so he can’t get approved for another card. ”

So people need to make more money or ask for higher credit card limits, he said.

Who is asking for a credit limit increase?

For all of 2023, the rate of applications for higher credit limits increased to 14.4% from 11.5% in 2022, with the largest increase among consumers with credit scores below 680, according to the New York Fed. Many of these applications were approved, and the rejection rate dropped from 35.3% in 2022 to 30.9% this year.

learn more: Best Credit Cards of 2023

The application rate in October was 17.8%, up from 11.2% in the same month last year and 12.0% in 2019, according to data from the New York Fed.

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Why do people ask for higher loan limits?

With inflation rising for three years and wages barely keeping up with rising prices, Americans are likely to lose their livelihoods and turn to credit cards to make ends meet, said JBR Associates’ Robinson. Stated. According to the report, credit card debt has reached an all-time high of $1.08 trillion. new york fed bank. And based on 2022 data from the Federal Reserve and the U.S. Census Bureau, average debt is $7,951, the highest level in at least a decade.

Carrying higher balances and holding more credit cards can make it harder for Americans to continue getting cards without hurting their credit score.

Typically, when applying for a new credit card, a lender must check your credit file using what is known as a “hard inquiry” of information, which determines the average age of credit accounts, i.e., how long ago all accounts were open. The average time spent is reduced. The average age of your accounts can indicate your experience with handling debt. Both can affect your credit score.

Depending on your lender, increasing your credit card limit may only require a credit check or “soft inquiry,” which won’t hurt your credit score and won’t change the average age of your credit accounts.

According to credit scoring company Equifax, if you already have multiple credit cards, you may want to request a credit limit increase. “Once he has more than two or three cards, tracking monthly payments can become confusing, especially if the accounts have different payment due dates.” said.
With the economy slowing and the federal funds rate, a short-term benchmark, at a 22-year high, banks are becoming more selective about credit card issuers.
Increasing your credit limit reduces your credit card utilization rate, or the percentage of your available credit, and improves your credit score. If this ratio exceeds 30%, it can negatively impact your credit score. As your credit limit increases, your utilization rate decreases and your credit score increases as long as you keep your spending about the same.

Why is my credit card application declined?

Banks are tightening lending standards as delinquencies rise well above pre-pandemic levels. especially among millennialssaid the New York Fed. Millennials usually refer to people born between 1981 and 1996.Furthermore, the bank unlikely A Fed study released last month showed that people with FICO scores of 620 and 680 are getting fewer credit card approvals than they were at the beginning of the year.

The average rejection rate for credit card applications in 2023 rose 1.1 points to 19.6%, according to the New York Fed.

Where are interest rates headed?The Fed is likely to keep interest rates on hold, signaling the end of its series of rate hikes.

How can I increase my credit card limit?

You can call your credit card company or make a request online. The company is consider Something like:

Credit scores and reports.
The number of new credit applications you have recently submitted that require a “hard” inquiry on your credit report.
Employment type and income.
Expenses such as housing costs and debt.

Is it better to have a higher credit card limit?

Yes, unless you use it as a license to spend more or take on more debt. A higher credit limit lowers your credit utilization ratio, which improves your credit score and eliminates the need to manage a large number of credit cards.

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Credit card limits up. New applications rejections up. Here’s why.

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