Lowering Credit Card Limits

I've been reading how more and more companies have been lowering credit card limits. I belong to a forum on credit card debt and it seems to very common nowadays.

In the past I would never have a client lower their credit limits because it can hurt their credit score. Now, instead of customers lowering credit limits, it is actually the credit card company.

Why is a lower limit bad? Well it hurts your credit utilization. Credit utilization is the part of your score that looks at your available credit vs. amount you owe on your credit card. For instance suppose you had a credit card with a credit card limit of $5,000 with a balance of $500. This would help your score.

Now if the credit card company lowered your limit to $1,000 this would lower your score. If you don't believe this will happen to you think again. Many people who pay their payments on time are having this happen to them.

I'm not talking about people with poor credit. This is happening across the board regardless of pay history or credit limits. You need to contact your credit card company if this happens to you. You want to request that your credit limit be restored.

If it's not restored you may want to pay off credit card and potentially look at closing account as a last resort.

Hope this helps.

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