Turned down for a credit card? You may need to shed some plastic

It is possible to have too much credit - even if you never use it.

A woman we know applied for credit from her local bank shortly after moving to that area from another city. To her surprise, she was turned down despite an excellent credit record.

What happened to her has been happening to many other people these days, as some banks, department stores, and other issuers of credit get more careful about screening applicants. Many of these companies have seen judges declare millions of dollars in debts uncollectible, as a growing number of people declare personal bankruptcy. Sometimes, however, this caution results in unwarranted rejection of good customers.

Those rejecting applicants such as this woman are looking for people who they think have too much available credit, says Delia Fernandez, a spokeswoman for TRW Information Services, the credit reporting division of TRW Inc.

A credit applicant may already have a $1,000 credit limit with Visa, a similar limit with MasterCard, $500 with each of three department stores, $1,500 with an airline, and $2,000 more from various other companies.

The bank or store then assumes that the applicant will charge up to the limit on all these credit cards - incurring a high-interest debt of $7,000 - and figure out what the total monthly payments would be. This, despite a credit history showing no such maximum-charging habits.

If the company thinks the monthly payments would be too much for the customer , the request for new credit would be denied.

Credit reporting firms do not make these evaluations, Ms. Fernandez says. They simply supply the information about a person's available credit and payment history. The decisions are left to the banks and stores.

In the case of the woman mentioned here, she had credit lines in both her new city and the one she had left. And while the first city was several hundred miles away, making it unlikely she would charge anything there, a nationwide, computerized credit information firm simply reports all available credit, regardless of the distance between cities.

If you have been turned down for credit for this reason, there are a number of things that can be done. First, a personal letter or visit to the bank or store that rejected your application may be enough. You can explain that you have never gone up to the limit on all credit cards at the same time and show that you have a good record of paying your bills.

Second, if you are applying for a bank-issued credit card like MasterCard or Visa, try another bank. It might be more careful in analyzing your credit and payment history.

Third, maybe you don't need all that credit anyway. If you have moved, write letters to the stores and others holding credit lines on you in the old city. Instruct them to cancel your credit card or charge account. Then take copies of these letters to the credit reporting agencies that supplied the new bank or store with its information. You have the right to know which credit reporting firm was used and to correct its files without charge. Copies of the credit-cancellation letters can serve as the correction. You could also take copies of the letters to the bank or store.

Fourth, you may want to cancel some of the credit cards or charge acounts where you live. Depending on how many you have and how often you use them, you may find you can get along with a lot less plastic in your wallet.

The process of lowering your credit line may take time. Some credit reporting services may not fully update their files for several months. So the next time you apply for credit, you may be turned down again, until the files catch up with your new status.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.

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