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Reducing Your Credit Limit Could Hurt Your Credit Score

Dear Experian,

I have one credit card with a zero balance and a $10,000 limit. Will my credit score be hurt if I reduce my limit to $5,000?


Dear CGC,


While the amount of available and unused credit is considered in scoring models, it usually is not as significant as your credit card utilization.

If you were carrying a balance, reducing the credit limit would cause your balance-to-limit ratio to increase. That ratio, called your utilization ratio, is the second most important factor in credit scores behind payment history. An increase in your utilization ratio would likely hurt your credit scores.

However, because you have a zero balance, lowering the credit limit will not cause an increase in the utilization rate, so might not affect your credit scores.

But, consider what happens when you do use your credit card. With a higher limit, a charge will result in a smaller negative impact on your utilization ratio. , With a lower limit, the same charge amount would cause your balance-to-limit ratio to be higher.

To get a better sense of whether reducing the limit will be beneficial or detrimental, request a copy of your credit report and purchase a credit score. Along with the score you will receive a list of the factors from your credit report that most affected it.

If your score is too low and one of your factors is that you have too much available credit, then it’s probably a good idea to request that your limit be reduced. However, it is much more common for consumers to receive the message that their utilization is too high, so having higher, unused limits would be beneficial.

Thanks for asking.
The “Ask Experian” team

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