Qualifying for a Line of Credit When Retired?

Most people believe that it easy to get a line of credit (LOC) from their banks until they go in and request one.  If you have a steady, secure income and good credit, you shouldn’t have any problems.  But, if you do not have a large enough annual income to qualify because you are self employed or retired, you may be surprised by a decline.  I have a lot of older clients that think they can get a line of credit easily from their banks – and prior to 2018, it was a lot easier.  Not now.  The banks are now mandated to show income stream to mitigate risk.  There are a lot of older clients that are living on low pension income but may find out that when they do an application with the bank, they are surprised that they don’t qualify due to a new car payment, condo fees or high property taxes.  Banks are looking for two things to approve demand loans/lines of credit.  They want an asset like a primary residence or an investment portfolio (usually 2.5 x the requested loan amount) and they also want monthly income.  It is no longer feasible to think that just because you own your home without a mortgage that this will guarantee you qualify for a line of credit.  Showing little to no income on your taxes is usually the nail in the coffin – when banks decline the application based on payment coverage and high GDS.  If you have a line of credit that you got years ago, secured on your primary res, make sure you use it once in awhile, to keep it active.  You certainly do not want to have to apply for it now if your income has gone down, and hopefully your bank doesn’t close it from inactivity resulting in you not having access for future uncertainties.