Yesterday I got home and checked the mail. One of the bills was a credit card bill. I open it up just to review it and I found something oddly strange about the statement, it appears that my credit limit had been decreased to $5000 from $7500. The most interesting part was the reason included in the statement:
NOTE: Due to your recent credit history your credit limit has been lowered to $5000
WHAT THE ….
Calling The Credit Card
I call up the credit card company to try and sorted it out since everything appeared in order on my recent credit score review. I got a very nice gentlemen on the phone:
Credit card Guy “It looks like we reviewed your credit score and what you have with other lenders and it was decided to lower your credit limit”
I rebut with “I have never been late on ANY bills and have always paid off this credit card in full without ever carrying over a balance”
Credit card guy follows up with “Well they may have also decided that you don’t normally use that much credit so there is no reason to have that much credit”.
I decided to end the conversation with the following “Well I don’t really understand. My credit score was lower when you gave me this limit. My score as gone up since then and now you want to lower my limit. I would like you to note that I’m dissatisfied with this and in future reviews if you decided to raise my limit, don’t”.
What’s The Problem
The interesting part is I never really wanted that much credit when I first applied for the card. I was only going to keep it at $7500 while we did our renovations which were completed 8 months ago. I think I’m annoyed and a little worried that my credit is being called into question. I’ve never ever had problems getting credit or being refused credit. I see this has a sign that things might be getting tougher for me in the future. If lenders begin tightening up on their lending practices I might not have access to funds when I need them or at the very least won’t be getting the best interest rate. Its apparent that repairing my credit score should be higher on my list of priorities.
Have you recently had your credit cut?
-mfd-
{ 5 comments… read them below or add one }
I wouldn’t worry about your credit score. If you are, send out for a report and look at it closely.
A number of credit issuers, not limited to credit cards, have reassessed the limits they extend to customers. This has nothing to do with you and everything to do with the balance sheet at the credit issuer. I know it may feel like a kick in the pants, but it really has nothing to do with your history or your credit score. The issuer is just trying to shore up their position by trimming the amount of credit they have made available to customers. The issuer has made too much credit available to clients and now they’re correcting. It makes sense to trim unused credit first (i.e., yours).
Hi Bob,
That’s part of the problem was that I recently ran a credit score so the decrease was a bit surprising. Hopefully it’s just the lenders pulling back a bit.
@mfd,
I’m curious. Credit is a commodity business where credit providers provide $1 of credit for cents on the dollar. Since Company A’s $1 is no different than Company B’s $1, the premium that they can charge is a combination of their risk in lending to you and a charge to cover their costs + their profit.
Why would you continue to do business with this credit provider when their service and answers to your legitimate question are poor? The switching costs of moving from Company A to Company B are negligible.
Further, does the action taken by the credit provider, reduction in your credit limit, affect your credit score? If multiple credit providers take this action, what’s the impact to you?
- P
Hey Phil,
Well at the end of the day I’m happy with the provider. Not to mention I like the rewards they offer. On top of that for me to move would require applying for more credit. This would be another hit on my credit score which is currently on the mend.
Now I’m not entirely sure how this plays out on my credit score. Having less available credit will probably help increase my score.
However each lender has a section for “notes”. It’s very possible that this lender could update this notes section saying that they lowered my my credit limit. If other creditors have the ability to see these notes then they could be a bit more apprehensive in providing me with additional credit.
Maybe someone who reviews credit history can fill us in on how they look at these note sections?
Hi Phil,
Check out the following post. It gives some insight into creditors can see on your credit report
http://www.canadianmoneyforum.com/showpost.php?p=3491&postcount=14
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