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Accept a pre-approved credit increase

If you are a reliable and timely borrower, who always pays their bills on time every month, then your bank may have previously approved an increase in your credit limit. A credit increase simply means that the maximum you can spend on your credit card each month is increased, which allows you to spend more each month. You may think that you do not need an increase in your credit because you do not even use all the credit you currently have. However, an increase in credit can offer many benefits that could be very useful in the long run. So, how do you know if you have to accept or refuse this credit increase? There is no right or wrong answer because the answer to this question depends on who is asking it. You must consider all the advantages and disadvantages of this increase and use your judgment to decide if this is the best option for you, based on your consumption habits and your lifestyle. Also depending on your current financial situation, the amount of your debts and your ability to repay them, accepting a credit increase is not always the best idea. This article describes and explains how a pre-approved credit increase affects your credit rating and indicates whether you should accept it or not. In the end, you have a choice, but it is important to think about the following information.

 

Why were you offered the increase?

Why were you offered the increase?

The reason you qualify for a credit increase on your credit card is due to a positive payment history and responsible consumption habits. With low to moderate expenses, while generating a high income, your credit score is already off. If you continue to pay your bills in full and on time and you have no problem repaying your debts, you will probably be entitled to a credit increase. Pre-approving your credit card for a limit increase is the means used by the creditor to recognize and reward your good customer behavior. By paying your credit card each month, you show creditors that you are in control of your finances and that you are able to manage a higher credit limit.

 

Advantages of a credit increase

credit loan

No credit check

Generally, when you apply for a loan or increase the credit card limit, your bank or lender will ask you to check your credit report with the credit bureau they work with (with Qualfax or TransCon ). This is called a credit check. Unfortunately, your credit rating will be reduced by a few points. Too many credit checks in a short period of time can significantly reduce your credit score and show potential lenders or creditors that you have applied for too many credit products and that your application has been denied. However, when you are pre-approved for a credit increase, your lender does not perform a credit check, which does not affect your credit score. That’s because it’s useless, because the banks see your favorable behavior and already know that you’re responsible enough for an increase. For your safety, you should always ask your bank if it will conduct a credit check once you have accepted the increase.

Less use of credit

A credit utilization rate is determined by dividing your outstanding debt by your current available credit. If you have received an automatic credit increase, which increases your current available credit, your credit utilization ratio will decrease. In addition, credit reporting agencies, such as Qualfax and TransCon, use this credit usage to calculate your credit score. As a result, the lower your credit utilization rate, the higher your credit score. However, this is only true if you continue to use your credit card responsibly and if you refrain from increasing your expenses. This will increase your debt and reduce your credit score.

 

Other benefits of the credit increase

Other benefits of the credit increase

Emergency cushion

Life can be fraught with financial difficulties and problems, and you can never predict what will happen in the future. With minor or major setbacks and incidents, you never know when you will need quick emergency cash. For example, medical expenses, road accident and repair costs, loss of employment and other personal financial dilemmas can create an immediate need for capital. Accepting an upper limit on your credit card allows you to make larger purchases with your card. That way, if you have an emergency, you have the financial cushion you need.

Reward Points

Having an increase in your credit limit on your credit card means having the freedom to make more daily expenses on your card. With less money being used and more credit card transactions, this also indicates more reward points earned through the use of the credit card. In addition, with the ability to make expensive purchases, you should use your credit card to make large purchases instead of cash, check or use your debit card. Making a little bigger purchases with your card can help you earn a lot of reward points, generating other benefits.

 

Disadvantages of the credit increase

Disadvantages of the credit increase

More debt

With more leniency and confidence to spend responsibly, individuals may be more tempted to increase their spending by increasing their credit. This can create more debt because the cardholder can abuse his card and slowly lose track of his expenses. If you often find yourself heavily in debt and pay only the minimum, you should rethink the acceptance of the credit increase. If you’re having trouble repaying your debts right now, increasing your credit will not make it easy for you, think twice before agreeing. A good tip is to spend only (on your credit card) what you can pay at the end of the month.

Credit check

You can get two types of credit limit increases, both sent as a letter. First, as mentioned earlier in the text, if you have been pre-approved automatically for an increase in your credit limit, your credit score is not damaged because no credit check is performed. To do this, your bank usually sends an email informing you of the automatic increase. However, sometimes you only receive an email informing you that you may qualify for a credit increase. If you received the second option, it could affect your credit score because your file will have to be checked, which will slightly reduce your score. If you currently have too many credit inquiries at once, this could seriously damage your credit score. Therefore, always ask if a serious investigation will be necessary before accepting the credit increase.

 

Do I have to accept?

credit money

For those of you who are asking if you should accept or reject a pre-approved credit enhancement, check the summary chart below to help you assess your current financial situation and determine if a credit increase is a safe and secure option. advantageous for you.

Cheap Loans – We help you find a cheap loan

This is exactly what most of us are looking for, we want to take as cheap loans as possible. Of course, cheap loans are much nicer and better than expensive loans, but what really makes loans cheap and how do you go about finding cheap loans? We shall try to clarify this here.

What Makes Cheap Loans Cheap?

bank

There are several things that affect how much your loan will cost you. To understand what makes cheap loans cheap and expensive loans less cheap, we divide it into the various factors that play into it.

Interest

What first and foremost determines how much a loan will cost you is the interest rate. It is not much more complicated than that. A high interest rate gives a more expensive loan and a low interest rate gives a cheaper loan. The interest rate is set by banks and lenders and varies from bank to bank but also between different types of loans and in different situations.

The loans that have the best interest rate are almost always mortgages. A mortgage is a secured loan, which means that your home is the bank’s security when you borrow. If you are unable to pay your loan, the bank can get back your money by taking / selling your house and picking up what you owe. You can also borrow by car, motorcycle, boat and other valuable gadgets as collateral and all these types of loans have relatively low interest rates. And low interest rates mean cheap loans.

You can get higher interest rates on some other types of loans

You can get higher interest rates on some other types of loans

If you have one or more payment notes, this will also affect the interest rate. The lenders who lend to people who have payment complaints will often charge a slightly higher interest rate due to the uncertainty.

fees

In addition to the interest rate, you will also have to pay a number of different fees in connection with your loan. There are, for example, setup fees, notification fees and sometimes some other fees depending on the bank and type of loan. It is important to remember that these fees can have a great impact on the total cost, especially if these are recurring fees and you have to borrow for a longer period. For example, you can avoid the notification fee by paying via direct debit. When comparing cheap loans, always make sure you include all fees.

Effective interest rate is a concept that is slightly different from ordinary interest rate. Effective interest is a measure of a loan’s total costs calculated on an annual basis, where you include both interest and any other possible costs of the loan.

The effective interest rate is thus a measure of the total cost of the loan and this is a very good measure to use when comparing different loans in the search for cheap loans. One of the few cases where effective interest rates are not so good is in those cases when you borrow a very short period, such as a month. Then the effective interest rate can be misleading, since it is normally calculated over a full year.

The length of the loan

The length of the loan

The length of the loan will also affect how much it costs in total. If you borrow USD 100,000 for one year and pay off the same amount each month, your monthly loan will decrease by USD 8300, which means you pay interest on a significantly smaller amount all the time.

If you borrow the same USD 100,000 for 5 years, you will repay significantly less amount and thus have to pay more in interest altogether. Then this does not necessarily mean that a shorter loan is better, but you should always keep this in mind when looking and comparing cheap loans.