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Reduced Credit Card Limits Hurting Credit Scores

Written by admin - 4 Comments

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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Comments (scroll down to add your own):

  1. 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 pm
  2. The 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
  3. More than a year since this post, and this issue of reduced credit card limits is no better. In rebuttal to the above response, I, like the original persons post, am a BOA, long term customer with all primary accounts theirs, plus 2 boa visa’s. Unlike post #1, I’m forced to carry a balance with 3 in college! I have BOTH visa’s on AUTO PAY, never missed, or late in 10 Plus years….however, despite the incredible money they make off of my high interest, high balances, they have consistently reduced my credit limits on both annually since 08′ equal to the amount “due”…. so, even profitable on time payers, with 250k/year on auto deposit!!!…are being cut back without “justifiable” cause! So whether its a post #1 scenerio, or mine, banks are regaling in $$$’s, via reduced credit limits to “show” increased equity in their own portfolios!! Then, despite this fact, and bail out money, govt refinance programs etc….they deny, delay, AND refuse. even qualified applicants. Its a HUGE oversight / loop hole of added insult to our failing e economy as MANY on time paying customers in good standing have declining credit scores due to ” high balances”!!! That oversight on new credit card laws to better control banks, is empowering them to maintain and even gain their status as America’s REAL government …..furious as this negative impact on preferred customers credit scores, has totally corrupted the FICO scoring system, and even the most responsible of patrons to ha e NO control over “decreased limits” for no real reason of “substance”…its a fraudulent tool, imposing “declamation of character, as the coco, at a glance judge, tried, and sentences us all at the touch of an electronic device!! Socialism at the least bordering total elimination of “true democracy”….The banks run the coco system and the coco system hand down instantaneous verdicts without regard or reward for on time payers!!! This gross oversight by government will reflect increasing foreclosures and defaults on accounts “due”, by people who absolutely can pay, but choose, like the banks, to reel in their assets for “self protection” of their assets. We have an enormous problem brewing that’s going to soon be, a hind sight scramble to fix…too little too late…the fico scores are too screwed up now…damage done….repercussions still to come….sad for all

    Comment by kay gandolfi — Dec 17th 2010 @ 7:35 am
  4. “coco” throughout my above post, should read “FICO”…a DROID auto spell tech thing! Other than that, u get the drift of the point…

    Comment by kay gandolfi — Dec 17th 2010 @ 7:43 am

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