Credit scores could be affected when credit limit is decreased

Dear Experian,

My credit is spectacular! One card has decided to lower my credit limit. I have never been late for any cards and all have been paid off. Will this hurt my score?



Dear DRU,

If your credit history is as good as you say it is, you don’t have anything to worry about.

Many companies are being forced to reduce their risk position for the safety and soundness of their business. One way to do that is to reduce their potential liability from customers charging more and more against their lines of credit.

Reducing the limit will likely cause your total utilization rate to increase abruptly. That might cause a decrease in your credit scores. However, with an outstanding credit history, that decrease is unlikely to be significant in terms of your ability to qualify for credit at the best rates available.

Credit scores simply reflect the likelihood that you will not repay a debt as agreed. Because you have an outstanding credit history, a few point reduction isn’t going to indicate any real increase in the risk of lending to you. Your credit scores will still show that you are an excellent credit risk.

For consumers who have less than excellent credit, it can be a concern if they plan to make a purchase using credit. To get the best rates, you don’t want your score to drop at all. The best way to off-set a decrease in your limit is to pay down your balances. That keeps your utilization low.

In fact, paying down balances is good advice for everyone during great economic times and bad!

Thanks for asking.

- The “Ask Experian” team 

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