Need Advice,will CC decrease hurt credit score?

[MountainHiker]

Need advice from the Myfico experts.A family member has just been informed that one of her credit card limit's will be lowered from $2000 to $1000.The bank gave the reason that she seldom used the card over the last 12 month and therefore don't need the higher credit limit. She has argued unsuccessfully to get them to raise it back.

The question is will this hurt her credit score? Her credit report will show a paid off balance but the new reported limit will be lower than her highest reported month high balance which could make future creditors believe she has been over her limit. Where does she stand in terms of damage to her credit, and will this keep her from getting future credit?

Thanks for your help

[dddewdrop]

       The lower limit will not hurt her score per se. If she has a zero balance at her statement date for her card and the card is reporting a zero balance, then all things being equal, this will not hurt her score. If she has a balance on this or any other card, then her score may be lower because reducing her CL will affect her util%.   ( i.e a $500 balance with a $2000 limit = %25 utilisation vs a $500 balance with a $1000 CL= 50% utilisation). A credit score is a snapshot of her report and util% is not cumulative. By that I mean that the score is based on whatever her util% is at the moment the report is pulled and where it was last month doesn't come into play. As far as it appearing that she was once over the limit because the limit was reduced, I don't think that is going to happen. She was not technically over the limit ever. It is kind of frustrating that the credit card company reduced her limit like this but as long as she keeps her balance at the statement date below 9% of her credit limit, her score should not be affected, everything else being the same. 

      Remember, the CRAs take a snapshot of her credit report on the statement date of the account, so that is the time when she should be sure her balance is less than 9% for an optimal score..

[youngandcreditwrthy]

Imo, it depends on her overall usage.
Example:
If she had $10,000 in avail cred with a $3000 balance across say..four cards... And then she suddenly looses $1000 of avail cred....
Then her overall util will increase.
My point:
Her other account balances need to be taken into consideration to determine the effect.
Also, maybe suggest she use the card to pay a small bill for the next 4-6 months and pif. That may get her the credit limit back or potentially, even a higher limit!

[dddewdrop]

Her other account balances need to be taken into consideration to determine the effect.
Also, maybe suggest she use the card to pay a small bill for the next 4-6 months and pif. That may get her the credit limit back or potentially, even a higher limit!

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I edited my first post to clarify that if she has any balance on any credit card then her util% will increase with a CL decrease on this card and uti% increase can mean a lower credit score. If she is carrying neither an overall balance above 9%util nor a balance on any individual card of over 9%, than her credit score should not go down, all else being equal. As far as keeping a low balance vs. demonstrating to the company that you are using there card and thus need a higher CL, it is hard to tell what to do. The credit card company said that they lowered her credit limit because she wasn't using her card so maybe to get it back, use the card more but pay off  any balance before the statement date to keep a low util%. In my opinion, this company is not worthy of my business if they are going to lower my credit limit like this. I would not close this card but nor would I go of out my way to charge additional stuff on it . It.  doesn't seem like this company has treated her very well and I wouldn't reward them for treating her badly. 

[youngandcreditwrthy]

Any company will lower/close a credit line for inactivity.... Even good ole GECRB. That's why you must use your accts at least once every six months

[MountainHiker]

Will other future creditors look at that particular credit card that was lowered, and view that as a negative and thus deny credit or only offer lower credit limits? Could instant credit approvals notice that lowered credit account?

[MountainHiker]

Any other opinions as to whether her lowered credit limit will scare off new creditors?

[MountainHiker]

Can a person get denied a credit card if they notice one of your different creditors has lowered your credit limit?

[honky]

They wont see that it was lowered, just the current limit

[MountainHiker]

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@honky wrote:

They wont see that it was lowered, just the current limit

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But will they see that the card has been over its new limit?