First we started hearing about arbitrary increases in credit card interest rates, and now this… According to a recent blurb in Money Magazine, however, credit card issuers have recently started reducing credit limits for some borrowers, even those with good credit records.
Factors that put you at risk are making an occasional late payment, living in a high foreclosure area, and/or carrying risky debts such as an interest-only mortgage. Unfortunately, a reduced credit limit can push up your credit debt-to-credit ratio (i.e., your credit utilization), which is an important factor in determining your credit score.
If you’re a victim to this sort of a decrease, try negotiating with your credit card company. In all likelihood, the change was triggered by a computer and it’s possible that a real-live person will be able to re-instate your old limit. If reasoning with them doesn’t work, threaten to cancel your card. If that still doesn’t work, then you should at least try to reach a compromise — perhaps an intermediate credit limit, or a favorable interest rate in return for keeping your account open.