Do you have a question about consumer credit? You may find an immediate answer by using the search engine. If you can't find what you're looking for, please fill out the form, being as specific as possible.
Please note: The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team will include it in a future column.
The information contained in this column if for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding your particular situation.
Please understand that Experian policies change over time. Column responses reflect Experian policy at the time of writing. While maintained for your information, archived responses may not reflect current Experian policy.
Topics addressed on January 21, 2009:
Requesting a decrease in your credit limit can hurt credit scores
Your creditor raises your credit limit. As a consumer, you are not comfortable with the increase, and you would like to lower the credit limit. What impact does this have on the consumer's credit score?
Actually, an increase in your credit limit can help your credit scores. So, unless you are just too tempted to charge up to the new limit, you should not worry about it.
The reason that a credit limit increase can help credit scores is related to something called your utilization rate, or balance-to-limit ratio. The lower your utilization rate, the less risk you represent to lenders.
To calculate your utilization rate add up all of your credit card balances and then add up all of your total credit limits. Then, divide the balance total by the limits total. If you have two credit cards with $5,000 limits, you have a total of $10,000 available.
If one card has a $5,000 balance and the other a zero balance, your utilization rate is 50 percent.
However, if the limit on one card is increased by $5,000, your limit total increases to $15,000. Your utilization rate immediately decreases to 33 percent.
You can ask your lender to reduce the limit or lower it to its previous level, but that likely won’t help your credit scores.
Thanks for asking.
- The "Ask Experian" team