If you are over on your credit limit, meaning that the High Balance is showing greater amount then what your Credit Limit is showing. You need to contact your creditor and immediately make a large enough payment to get the balance back down below the credit limit.
This can hurt your credit score just as much as if you had been late, or had collection / charge off rating. And I mean hurt, like 20 to 50 points against the score for each offense!
You may be hit with an over the limit fee, and a late payment. This might result in the interest rate with that creditor being increased to near 30% APR. If you ask the creditor nicely to waive the over the limit fee. There is a new law in affect that says other lenders seeing the negative listing on the credit report can no longer use it as an excuse to raise your interest rate with them.
If you current lender raises the interest rate, then after 6 months of on time payments the high interest rate can be returned to the previous rate. If you opt out of the increased interest rate, you may be able to maintain the current interest rate, but the lender may require the account to be closed. That is not the desired outcome, if you can stick with the increase and work to pay off all of the balance so not to be hit with the high interest rate in the following 6 months to come until the previous rate in can be reinstated.
You can fix this! Provided the account is still open!
1) Immediately pay back down below the credit limit – this is so so important, because as long as you are over, they can hit your account for over the limit fees, and this is one trap that can put a person easily on the road to charge off, it can break you.
2) Age the account, you have to prove to the lender that you can get back down below that credit limit and stay there. You will want 6 months to 1 year clean payment history with no other problems like lates and such.
3) Request increase in the credit limit – At the very least ask for your credit limit to be increased for a bit over what you had exceeded the credit limit by.
4) Utilization is very important as well for the creditor, usually a good idea not to be over 50% utilization when you request credit limit increases. The higher the balance at the time, the more likely you may be to get declined for the increase.
5) Request that they update the credit reporting agencies to the new increase! This way you have fixed the reporting babble that hurt the score, it might not gain back what you had lost being that time will have passed, but it will make your report look better to other prospective lenders!
It you can get the creditor to report a higher credit limit then the highest charged amount will be below the credit limit and if you get the balance down to lower then 30% of the credit limit the score will recover.
Just because you have a problem, you should not immediately get upset and close existing accounts. Times are hard right now to just go out and get a new account. Once the negative information hits the credit report other lenders are going to be less likely to grant new credit. They want to see consumers pay more then the minimum balance, they want to see a clean payment history with no past late listings, and they want to see a low balance verses credit limit. Meaning low utilization.
If you can’t immediately pay down the balance, you might try to apply for new credit and balance transfer a good portion of the balance over onto another card to distribute the balance and get utilization down.
If you apply for new credit and get denied, you can always go back pay down the balance and resubmit to the credit reporting agency to notify that other creditor that changes have been made and you want them to reconsider past applications. The credit reporting agencies can send out updated copies of consumer credit reports to companies dating six months back on the credit report. It is better to notify the credit reporting agency to send out updated credit report, then it is to go back to the lender and re-apply again. That will only cause another credit report to be pulled causing another inquiry.
Inquiries should be kept below 3 or 4 per year. Inquiries can add up quickly and cause consumers to be declined because they are shopping for too much credit in a short period of time.