Credit line

My credit card issuer is cutting my line of credit in half. Will it hurt my credit score?


Welcome to Ask Clark, a column designed to answer your financial questions, by money expert Clark Howard.

Will losing half of my credit line on a card hurt my credit score?

Louisiana Myron demand: “I have a credit card that I have had for over 20 years. The credit limit is $ 18,000. In the past seven years, I haven’t used it that much, putting maybe $ 400-500 a month on the card. Before that, I was putting around $ 4,000 to $ 6,000 per month on the card. I have always paid the entire balance every month.

“Today I got a letter from the bank saying they noticed I was spending way under the available line of credit, so they reduced the line of credit from $ 18,000 to $ 9,000. Should i be worried? My credit score has always been over 800. I don’t want anything that could hurt him.

Clark’s take on whether lowering your line of credit will hurt your credit score

Clark says: It is likely that your continued low use of your available credit will “sound the alarm” with your issuer, who may see this as an indicator of your financial health. The real problem here is how a reduction affects your credit utilization rate.

Your credit utilization rate is the amount of credit you used compared to the amount of credit you have. You have a ratio for each credit card account in your name as well as for your overall credit portfolio.

“So if you have a number of other credit cards and you keep your usage – the amount of your available credit – at 30% or less, and preferably if you’re over 800, your usage is probably lower.” at 10%. As long as your ratios stay in that general neighborhood, it won’t hurt you significantly, ”says Clark.

“On the other hand, if this reduction by your issuer, reducing your credit limit by half, reduces your overall available credit to a point where the amount of billing you make each month causes you to exceed that 30% threshold, it will hurt your credit. score and stand a lot.

How to compensate for a reduced credit limit

Clark says the way to make up for a reduction in your credit limit is to open a new line of credit to replace what you are losing.

“What I recommend is that you apply for a credit card somewhere else to bring more available credit into your life if you’re going to have a problem with using this reduction and limit going into effect,” says Clark.

“There are a number of good no annual fee cards that offer nice rewards for someone who is a net payer like you and that is how you would offset that reduction in your limit,” he adds.

Here are the credit cards used by Clark.

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