Credit Limits on cards just lowered...

[ScrimpAndSave]

I got a statement from Bank of America that my credit limit on two of my cards have been lowered because of my income and because of new rules. I have a Bank of America card that HAD a credit limit of $30,000 but now it has a credit limit for $10,000 and another card had a limit of $20,000 and now it has a credit limit for $5,000.

I do not usually have a balance on either card and if I do - I pay it off within the month. I am afraid this is going to affect my credit score...

Weird thing is, I am making more this year than I ever have. What the heck? Is this really bad? I don't EVER have more than like $120 on a card...so I never used anything near the limit of the card...but I am still sort of pissed about it.

[disneysteve]

They are cutting limits all over the place before the new rules kick in next month. I'm surprised mine haven't been cut yet. Not much of anything you can do about it unfortunately.

[wincrasher]

Remember, ratio is all that matters - not the limit.

[Joan.of.the.Arch]

I wouldn't worry about it. It is a big cut, but any effect on credit rating will fade over time anyway. Who knows, maybe the credit bureaus will nudge their formulas in response to the lender's reeling in of credit lines in general.

Fortunately, you already got your house financing set up at a time favorable to you and apparently you got most of your house related purchases arranged. You have your secure job. What do you even need an exquisite credit rating for at this point? By the time you need it as high as possible, it will probably have risen again anyway.

[disneysteve]

Remember, ratio is all that matters - not the limit.

That's true, but if they slash my limit to 1/3 or 1/4 of what it is now, that affects my ratio. Even though I pay my balance in full every month, my score is still affected by how much I charge because on any given day of the month, I do have a balance. If somebody checks my credit right before my bill is due, they could see a 3K balance or more on my CC. If my limit is 30K, that's 10% utilization. If the limit gets cut to 10K, that's 30% utilization.

[mommyof4]

One of mine just got cut in half, too, and another one was cancelled on me completley because I never use it. Both accounts were paid in full and have had NO problems with late payments, etc.

[wincrasher]

If my limit is 30K, that's 10% utilization. If the limit gets cut to 10K, that's 30% utilization.

That's right. But you can correct that in a month. So if you know what's happened, you can adjust for that by lowering your useage.

People that revolve balances are the ones who get screwed.

[disneysteve]

That's right. But you can correct that in a month. So if you know what's happened, you can adjust for that by lowering your useage.

I don't want to lower my usage. And I have no control over what day someone checks my report. If they check it the day after I paid my bill, my balance might only be a couple hundred dollars. If they check it the day the bill is due, it might be $4,000. Sure, I could control that by not using my card anymore, but then what's the point of having it.

[wincrasher]

that's true. I'm just saying that you are put in a short term inconvience whereas other people are devastated.

Personally, I'd rather have the limit increased on my rewards card and not have some of my other cards. But that becomes an eggs in basket thing that is not very wise.

[myrdale]

I dont believe that this would have any significant effect on your credit score at all. You said you pay the cards off monthly when you have a balance. I believe you have a house now also? Between making your mortgage payments on time and paying the cards monthy your credit rating will soar.

[wincrasher]

myrdale - depending on when a credit report is pulled, the credit card reports the current outstanding balance. This is used to calculate your credit score. A ratio above 30% can effect you negatively.

Granted, knowing your limit is lowered, you can cut back on your future spending on that card and avoid the problem. It's just that in the current environment, you can get blindsided by a drop in your limit if you didn't get a letter or notice it on your last statement.

You do bring up a good point, and I've noticed it in my own report. I say I pay off my balances each month, but my credit report always shows a low balance, because of the timing of when the information is posted.

[Like2Plan]

I have pondered the high credit limit quandry. On one hand, it seems like a liability because some credit card companies keep tabs on your overall credit limit. Then, there is the liability of having a high line of credit open (fraud and scams)--though CCs are pretty well protected in that regard.

Our credit limit exceeds the amount we could pay on a monthly basis, so I had thought about asking for a reduction in the credit limit. How much do we really need?

On the other hand, I have run into some situations where I have charged large amounts on my CC. College tuition, college room and board and Christmas shopping are some expenses which come up periodically. I have savings to cover the expenses, but I use the CC to get reward points first whenever I can.

I've noticed that the highest balance stays on the credit report (I guess until you close that account out and then for as many years back as they report the data). I am not sure how the highest balance figures into the fico score--especially if the limit is lowered below the highest balance... If someone did an inquiry, would they think the credit limit was exceeded? If it did figure into the calculation, I think it would almost be better to close the account out and start over. Of course, you would have to weigh that against how long you have held the card and how many cards you have opened/closed in the past year (s), et'c.

[cicy33]

Perhaps the bottom line is the credit score companies are seriously flawed and until someone takes the value out of them nothing is going to change. I know they have their place but sometimes I feel they are getting a little to big for their britches.