Reduced Credit Card Limits Hurting Credit Scores
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.
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My credit line with Bank of America was 35000K and I was using the card very rarely (once in 3 months). I always used to pay online in full just before the billing date. Effectively no balance in my a/c for the last two years. They just reduced my credit line to 15000K. No explanations were given. Hope this will not affect my credit score or report. Felt let down by the system for no fault of mine. This is happening in the greatest democracy of the world. May be democracy is applicable only to select few. How banks Banks can judge you without a trial or atleast intimate in advance that they are going to shoot you. My credit score in excellant and I know BOA got a system of regularly checking my credit report. There is no negative item in my credit file. Is the banking system is in the grip of panic? I felt help less and attacked!!
Comment by Aarkay — Mar 31st 2009 @ 3:01 pmThe banks want more interest and people like you who pay back intime are of no use to bank they want you to be in the group who will utilize more and pay interest so the drop in credit limits.
Comment by Gem — Aug 12th 2009 @ 4:22 pm