Can a Lower Limit Affect My Credit Score?

Ask Savvy: Can a Lower Limit Affect My Credit Score?


Dear Savvy,

So, I got a letter in the mail today from my credit card company telling me that they were lowering my credit limit. I don't use this card much, don't carry a balance on it, and definitely don't need a $14,000 limit. I'm just wondering, does it affect my credit score or anything?

To see my answer, read more.

Savvy says: Even though you don't carry a balance on the card, a lower credit limit could impact your credit score. To find out why, read more.

Credit card limits are taken into account when calculating your credit-to-debt ratio, meaning how much debt you have compared to the amount of credit available. If you're carrying debt unrelated to the card, having less available credit lowers your aggregate credit limit, which can bring down your credit score.

Add up all of your existing balances and divide that number by the sum of all your cards' limits. What you end up with is your utilization percentage, and it's best to keep this number under 35 percent to maintain a good credit score.

Credit card carriers are cutting limits more frequently these days so be sure to open your mail, like this reader did, instead of sending it straight to the shredder. Carrying zero balances on your cards is ideal, but be sure you're using them at least every few months so you have a better chance of keeping your limits in tact.

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