Here Is Why Your Credit Limit Can Be Lowered And What To Do About It

In Education

Sometimes your credit card limit can decrease all over sudden because of a change in your spending habits. A decrease in credit limit can lower your potential of earning rewards, increase the cost of other credit types as well as affect your credit score. Here is what you should do when you realize your credit limit has been lowered.

Understand why credit limit was decreased

A credit card is a form of debt because you use the card and spend repeatedly and then later pay off the balance. The credit limit is the maximum amount you can spend on your credit card, and this is set depending on your credit score and credit report.

However, a change in your spending can spook the credit card issuers and see you as a risky borrower, and if you miss payments or have higher balances than before, this could result in the issuer lowering your limit. Keeping credit card utilization below 30%, and paying the balances on time might not decrease the credit limit.

Also, account inactivity and drop in credit score are some things that can result in a credit limit decrease. If someone steals your card and there is an uncharacteristic change in spending, this could result in a decrease in the limit if not reported or caught; it is important to check credit reports semi-annually to see if there is any fraudulent activity or errors.

What to do when the credit limit is decreased

The first move should be to call the issuer and check why the limit was lowered as the reason might not be about your spending habits. You can ask for a reconsideration of the decision, but if that is off the table, you can as what you should do to improve your limit.

Checking your credit reports can be helpful because you will be able to see if there are any errors considering these are used in determining a credit score. Correcting errors on your reports can improve your score, which is important in determining credit limit. Most importantly, you should use your credit card responsibly.

Mobile Sliding Menu