Credit Score

Why Credit Card Companies Are Lowering Limits & What You Can Do About It – WSOC TV

CHARLOTTE, NC – In the first four months of 2021, nearly one in three credit card holders had their credit limit reduced or their account closed, according to a new report from LendingTree.

Matt Schulz works for LendingTree and he said it happened to him.

“I closed my second oldest card,” he told Jason Stoogenke of Action 9.

“[The credit card companies] were certainly concerned that people in the midst of a pandemic who just lost their jobs, who were very concerned about their finances, are starting to rack up those credit card bills and may not be able to pay them back ”, Schulz said.

It can also happen to people who spend less.

The LendingTree survey showed that businesses can also target dormant or under-used credit cards for limit cuts or closures.

Not only can this surprise, but it can also hurt your credit score. Your score depends on the percentage of available credit you use, so even if you spend the same amount, if your credit limit goes down, you are using more of it.

For example, if you spend $ 1,000 on your credit card and your credit limit is $ 10,000, you are only using 10% of your available credit. But if the company reduces the limit to $ 2,000 and you still spend the same amount, you are now using 50% of your available credit.

Schulz said there are ways to protect your card from closing or reducing the limit.

First, he recommends asking the credit card company to reset your limit to where it was. That’s what Schulz did when it happened to him, and he said it was working.

“If you don’t ask, you won’t get it. It’s sure, ”he said.

“It’s really important that people understand that they have more power over their credit card issuer than they realize, especially in these really competitive times. But so few people actually use it, ”he said.

“A lot of times you just have to pick up the phone, call your credit card issuer and ask for that break, ask for that lower rate, ask for the higher credit limit, and your chances of success are good. better than you. think they are. You just have to pick up the phone, ”he added.

If that doesn’t work, here are other steps you can take to protect your credit score:

Spread your spending across other credit cards so you don’t use more than 30% of a single card.

Make an extra payment in the middle of the payment cycle so that your statement is lower.

Consider increasing your limit on your other cards, but be careful. First, find out if they are performing a “rigorous credit check” as this could affect your credit. Ask for a “smooth check”.

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