"A good first move is to contact the creditor to see if the old limit can be restored," she advises. Therefore, you should call your credit issuer and ask for them to reconsider, argues Tayne. When your credit line is slashed, you're a lot more likely to go over your maximum credit limit. "This could cause a domino effect - a higher utilization would lead to a lower credit score, which other lenders could perceive as an increase in risk and lower the limit of other cards that the person has," Tayne explains.Īnd less available credit means less spending power, which is not great if you had planned on making a large purchase or need to rely on your card to cover basic expenses during this difficult time. But if their card issuer decreased the credit limit to $500, that same $100 balance would cause utilization to jump up to 20%. Credit utilization makes up about 30% of your credit score, and if you plan on applying for a mortgage or other kind of loan in the near future, a spike in utilization can look like a red flag.Ĭonsider this example: If a consumer had a $100 balance with a $1,000 credit limit, their credit utilization would be at 10%. This is "incredibly important," says Tayne. You can ask your creditor to reconsiderĬredit limit decreases are not the end of the world, but they can cause your credit utilization rate to increase. "American Express has also implemented a new policy limiting cardholders to four consumer or business lending cards and ten charge cards, so consumers who are currently at this limit or over it won't get approved for another card from Amex," says Tayne. If you currently have an unused line of credit, your card issuer might decide that it's easier to reduce your limit now before you could theoretically max it out in the future. So while card companies look with more scrutiny at high credit utilization rates and missed payments, they are also more likely to reduce your access to their credit if you're not already demonstrating that you can borrow and pay off large amounts with regularity. "Tighter underwriting on applications means that lenders are looking to minimize the amount of risk faced when lending money," says Tayne. This even goes for customers with good credit. "Card issuers are closing cards and slashing credit limits on inactive cards to further prevent risk when lending," says Tayne.
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