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Discussion Starter #1
All... looking for some feedback from the group. I was recently declined for a credit card, much to my surprise. I'm under 35 years old, earn over $150K, have paid off my mortgage (no mean feet in GTA), always pay off credit cards and bills on time without accruing interest and have no other debt, except for a line of credit. Have never been declined for credit before.

Transunion scored me just over 700 which is "Fair" from a credit perspective, but borderline with "Poor" which is 699 or less. I assume the reason for this is that having recently paid of my mortgage, I recently decided to "celebrate" by maxing out my TFSA/RRSP from my line of credit - which I get an great employee rate for. I am perfectly comfortable lending to borrow in this scenario. However, this means I've utilized over 80% of my available line of credit.

I can't think of any other reason for me not to have a great credit score. Assuming this is the issue (interested in opinions on that)... what is an acceptable amount to utilize with a line of credit? Assuming I can, could I just have my FI increase the available limit (I remember them saying I could get more), bringing down the utilized balance as a % of the overall available amount?
 

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The recommended is 30% of credit utilization or less. Higher percentages knock points of credit scores.

Options are to increase credit limits or pay down some of the debt.

The credit agencies don't match investments with the credit used to secure the investments, so it doesn't matter to them if you put money into an RRSP or spent it on clothes.
 

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Discussion Starter #3
Thanks for the feedback... To me the LOC limit was fairly arbitrary, and I know at the time I could have got a much higher limit... So this arbitrarily low limit is now coming back to bite me because I've used up a greater percentage. Seems strange to me to be honest... Am I understanding correctly? Also, I get get this cleared up pretty quickly to get it down to 30%. How long would it typically takes for my credit to be restored?
 

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Credit utilization has an immediate affect on credit scores. It will start to climb back up every month after lowering the debt utilization percentage.

Usually it will move 15 -20 points a month, but sometimes it will be more dramatic. A credit score could move 40 points higher or lower, depending on the percentage of credit utilization.

Paying down balances "before" the statement date is also important, as it is the monthly statement balance that is usually reported to the credit agencies.
 

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Many, many years ago I ran into a similar situation. I applied for a credit card and got denied. I actually called and asked why I got denied and it came down to having a HELOC and an investment loan that used up a good portion of my available credit.

The funny part is that a year or two later my bank bought the credit card company that I had applied for a credit card with and I was able to move the credit card I had with my bank over to the credit card I previously applied for.

If you have your mortgage paid off one (sort of silly) way to game the credit score crap would be to get a HELOC against your house that you never use. This will bump up your available credit and probably your credit score.
 

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Does available credit make any difference?

For example, I have an LOC with a limit of 180k, but currently the balance is 70k and decreasing with time. When I apply for future credit (i.e. car loan, mortgage, whatever) which number would be taken into consideration by the bank?
 

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Discussion Starter #7
Many, many years ago I ran into a similar situation. I applied for a credit card and got denied. I actually called and asked why I got denied and it came down to having a HELOC and an investment loan that used up a good portion of my available credit.

The funny part is that a year or two later my bank bought the credit card company that I had applied for a credit card with and I was able to move the credit card I had with my bank over to the credit card I previously applied for.

If you have your mortgage paid off one (sort of silly) way to game the credit score crap would be to get a HELOC against your house that you never use. This will bump up your available credit and probably your credit score.
Sorry, to be more specific... the LOC I have is actually a HELOC, it's not an unsecured LOC. Does it matter whether it's secured or not? I think your point though is that by getting a second LOC I would bump up my available credit, thus bring the % utilized down. Correct?
 

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Yeah, I don't think it matters if it is secured or not. You mentioned above that you thought you could have had a higher LOC limit. Having the higher limit would make the percent of available credit used lower.

I think that sags suggestion is probably easier though. Just pay down the LOC fairly quickly and it should impact your credit score fairly quickly as well.
 
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