Editorial Policy

Forget credit limit increase if card is maxed out

Erica Sandberg

June 19, 2015

QHi Erica,

Due to needing more credit, I asked my credit card company, Capital One, to increase my limit, and they said “not at this time” because my credit line is already overextended. No kidding: This is why I need more credit! I want to get out of Capital One and be with a credit card that is more professional and actually helpful. They are crazy to not help me, because I've been with them since 2009. — Jesse

ADear Jesse,

I'm afraid that you are not thinking clearly about your financial situation. Based on the provided information, any lender would question your ability to manage the balance you're holding on to now, much less increasing it by giving a higher line of credit.

You see, being overextended means that you owe too much at a particular time. It is generally defined as having a third or more of your net income committed to consumer debt payments.

For example, let's say you bring in $2,200 each month. If $500 or so is promised to your card company for the minimum requested payment, you would only have about $1,700 left to live on. Subtract housing costs, food, gas and other essentials, and you may have little to nothing left over — you might even come up short. Borrow more and you'll have an even larger payment to deal with. Where is that money going to come from? Ask Erica

Capital One is not privy to your salary (as it was when you first listed it on the card application), and it never checks expenses. What it does know is the balance you're carrying, and that alone speaks volumes. Hanging on to a debt that is at or close to the maximum sum that you can borrow is a warning sign that you're in trouble. After all, you'd pay the debt down if you could, right? By asking for more to spend, you add to the company's suspicions that something is not right. It's a logical leap to deem you overextended — and deny you a credit increase.

That said, it would behoove Capital One to help you in a productive way. All creditors have the same desire: to not lose money. Therefore, they want you to send your payments on time and to not owe so much that you can't use the card. They definitely do not want you to default so they don't have to waste time and resources chasing after you, sell the account at a loss to a collection agency or have you to discharge the debt in bankruptcy.

You have a long history with Capital One, which will be beneficial when asking for assistance. Explain that you truly want to pay off your debt and ask what the issuer can do to make it easier. If your APR is very high, request a rate cut, so less of your payment is going to finance fees. The company may not do so right away, but it might if you work down the balance a bit.

What is most important is to help yourself. You must live within your means, a feat that will be much easier to accomplish when you're in the black. Stop all charging and borrowing immediately, then construct a tight budget with the intention of sending every spare dollar to your creditors. You might take on a fun job to make extra money or sell unwanted items. The faster the debt is gone, the sooner you'll have more cash to spend and save.

If you need guidance, book an appointment with a nonprofit credit counseling agency. The best way to find a qualified agency is through either the Financial Counseling Association of America or the National Foundation for Credit Counseling. Appointments are free and their debt repayment program could be a viable option.

See — now this is a smart and sane plan!

Got a question for Erica? Send her an email.