You probably woke up recently like any other day, had your breakfast, prepared yourself for the day and checked your emails. While checking your emails you open an email from one of your credit card companies and realized your credit limit has been DECREASED! You have no idea why, it just happened without notice and you do not know where to even start to find out why. You’ve made all payments on time, stayed well under the correct utilization rate and still do not understand why this happened, Well, unfortunately this is what the year 2020 has come to. Sometimes when a credit card company decreases your limit it is due to lack of credit use, having no credit utilization to the credit card or they notice a change in your buying/spending behavior. Believe it or not, creditors track your spending habit and alter your limit based off the new buying behavior.
But that may not be the issue today with your credit card limit decrease. If you’ve notice a credit limit decrease on your credit card accounts it could be one of many things. First things first, conditions are worsening here in America, sadly. We are currently in a recession, due to the 2020 recession creditors are lowering credit limits or closing accounts all together. Just like they did during the great recession in 2007 that lasted for two years! We are literally in the middle of a financial crisis. The banks have less money to lend and are becoming afraid that customers will have a higher chance of becoming delinquent on payments. While the creditors are lowering credit limits, this unexpected credit cut is affecting our credit score in a negative way and the ability to borrow more money if necessary in the future.
No one specific is being targeted during this credit limit decrease . At first I thought maybe anyone that could have deferred their payments during this pandemic or anyone that has a history of late payments and not paying their balances in full would be the main ones affected but I was wrong, it’s honestly all about mitigating financial risk for the banks. So, if you’ve been affected by this let me give you a few tips of what you can do during this time.
WHAT TO DO IF YOU’VE RECEIVED A CREDIT LIMIT CUT
First things first, it won’t hurt to call your credit lender and ask for a credit increase. Granted, they just decreased your limit but it wouldn’t hurt to call and give it a try. If you have a great credit history there’s a chance they may reverse their decision. You should also ask and find out if there is a specific reason for the initial credit limit decrease. You’d be surprised how much information you can learn when asking simple questions.
While banks are allaying their financial risk, we are now worried about our overall credit utilization. If our credit limits are being decreased than our credit utilization is being increased, which can negatively impact our credit score. It would show that we used more of our credit limit, making the utilization rate more than 30%. How can we fix that? If you get denied for the credit increase on your current credit lines, consider opening a new card to make up the lost credit and help the utilization ratio. Keep in mind that you will be hit with a hard-inquiry causing your score to temporarily drop by 6-12 points. Also consider the kind of credit card you open. If you have great credit history and do not have an AMEX card, consider this time to open one and take advantage of the bonus cash you can receive.
Continue to use your current credit cards. Be sure to use credit cards you normally wouldn’t use and have stashed in one of your purses on the closet shelf for emergency purposes. Credit lenders are closing in on accounts barely used within the last year and accounts with no annual fee. No matter what, continue to build positive credit history. Always use less than 30% of your limit, if your balance seems higher than normal now work on paying that balance off as quickly as possible. Do not throw all your hard work out the window because America wants to go to sh*ts, protect your credit at all cost.
If you have any specific questions, do not hesitate to send me a message because having excellent credit is a choice, it’s #UrChoice!