As I’ve noted in the past, credit utilization has a major effect on your credit score. It should thus come as no surprise that recent moves by credit card issuers to reduce the credit limits of certain customers is negatively influencing credit scores.
According to a recent report in the Seattle Times, approximately 45% of US banks reduced credit limits during the 4th quarter of 2008. The article also highlighted the case of a 58 year old construction company owner in San Diego who saw his credit score drop from 760 to 650 as a result of the changes.
If you’re faced with a similar situation, you should pay down your balance as quickly as possible. You might also consider a balance transfer to a card from a different issuer. If you play your cards right (no pun intended), you might even be able to reduce your interest rate.