Credit card issuers have the right to lower your credit limit, which can be frustrating for cardholders. While a credit card company might increase your limit, they can also decrease it based on certain factors. One common reason is inactivity. If you haven't used your credit card in a while, the issuer may reduce your limit, assuming you no longer need the full amount.
Another significant factor is missed payments. Consistently paying late or missing payments altogether signals to the issuer that you might be a higher risk. This can lead to a lowered credit limit or even account closure. Changes in your credit report can also trigger a decrease. If your credit score drops due to increased debt or other negative marks, the issuer may reduce your available credit.
To avoid a credit limit decrease, use your card regularly, even for small purchases, and always make your payments on time. Regularly check your credit report for any errors and address them promptly. Maintaining a low credit utilization ratio (the amount of credit you use compared to your total available credit) is also crucial. If your credit limit is lowered, contact your issuer to understand the reason and explore options for increasing it again.
Credit Card Limit Decrease: Why It Happens and What to Do
Credit card companies can lower your credit limit, even if you haven't done anything wrong. This can negatively impact your credit score. Several factors can trigger a credit limit decrease, including inactivity, missed payments, or changes in your credit report. Understanding these reasons and taking proactive steps can help you maintain a healthy credit line.
Source: Read the original article at CBS