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How to get extra credit to pay for a dream vacation

Erica Sandberg

June 14, 2016

Q Hi Erica,
I am trying to book my vacation, but the credit card I have for travel (Capital One Venture) doesn’t have enough left on it. The credit limit on the card is $10,000, and I owe a little more than $7,000. My vacation package to Costa Rica is about $3,200. I know my credit is very good. Should I apply for a brand new card to pay for the trip, or am I better off getting a credit limit increase on my card? — Laura

A Dear Laura,
Before you do anything, make sure your credit rating is as high as you believe. This will help in assessing your options.

As you may know, excellent credit scores, whether calculated by FICO or the latest version of the VantageScore, begin in the mid-700s. To qualify for the best new credit cards as well a significant credit line increase on an existing card, a high credit score is an important indicator that you are financially responsible and may be able to handle more borrowing power.

While it is possible your current credit scores are in the upper echelons, the card balance you cite is cause for concern. You’re using around 70 percent of your credit line, and if you don’t delete that balance quickly, your high credit utilization ratio will negatively impact your credit rating. This is especially true for the FICO, as your credit utilization — the amount you owe relative to your credit limit — is a big factor in calculating your score. For both FICO and VantageScore, very low debt is ideal.

However, this is only one account, and you may have others on your consumer credit reports that indicate that you are a perfectly fine credit risk. If that’s true, your scores may be great and your financing options will be open.

In any case, check either your FICO scores or VantageScores (or both because you never know which scoring system a credit issuer will use) to see what they are today. Capital One offers its CreditWise score for free for cardholders, which is the VantageScore. Then you’ll have a clear idea of what options are available to you so that you can go on your vacation to Costa Rica.

If your scores are in the upper 700s and you have a decent, steady income, you likely will qualify for a credit card offering a sweet sign-up bonus as well as travel-related perks. That sign-up bonus can translate into 30,000 bonus points or more, which you may be able to use for your trip, thus offsetting some of the costs.

Since your vacation is over $3,000, that should be enough to satisfy most credit issuers’ minimum spending requirement during the first few months to get the sign-up bonus. However, you will probably have to wait at least 30-60 days before those points post to your account after you meet the minimum spend threshold.

With this new card option, the problem is time. If you need to pay for the vacation right away, it can take a week or so to get the card, even if you’re approved immediately. One option: Call the card issuer once you are approved for the card to ask for a rush delivery.

Or, requesting a credit limit increase on your current card may be the better option. Credit limit increases are typically granted to those who pay their bills on time and who have had their card for more than several months. The longer you’ve successfully managed the card, the greater likelihood of getting your request granted.

Even better, though, is for you to decrease the debt you have. If you can tap any savings to apply to the balance, do it. Or come up with some quick cash. Sell unnecessary stuff, slash living expenses, work more hours, get a second job — do whatever it takes to bring the total of what you owe to zero by paying as much as possible. Doing so will help your credit scores rise, and slash your financing fees.

You have plenty of options, depending on your credit score. But look beyond this trip. I understand the lure of a tropical getaway, but trust me, you don’t want to return home to a massive and expensive bill on top of what you already owe.

Got a question for Erica? Send her an email.

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