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Reduced Credit Limit

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GovtGal
Valued Member

Reduced Credit Limit

I have a question. About credit limits.

 

I just started the process of purchasing a house.  As part of that I needed to pay off my credit cards.  In the last few weeks I have paid all my cards down to zero.  This is a summary of what I paid:

 

Card               Amount Paid Off/Credit Limit

 

HSBC MC       2433/5000

WAMU MC      3805/5000

WAMU VISA    2877/5000

 

Today I logged on to my accounts to make sure everything went through properly.  All my accounts are showing zero balances but the credit line on my HSBC mastercard has been dramatically reduced to $300.  I called and asked them why and they gave me a canned response about them making a business decision.  Will this hurt my FICO score?  How can paying off debt make you no longer credit worthy?  I have no lates for over five years and zero lates with HSBC.

Message 1 of 8
7 REPLIES 7
Uborrow-Upay
Valued Contributor

Re: Reduced Credit Limit

Don't worry about it.

 

Your total credit availability has been reduced, of course, but since you've paid everything down to zero, your utilization is still 0%, even with the reduced CL for HSBC.

 

Your FICO is going to show a dramatic increase once those pay-off payments post to your credit report.  Try to not use the cards, or if you do, pay the balance in full before the closing date for the account, at least until you've obtained your mortgage loan.

 

Congrats on the payoffs, and good luck with the house hunting! 

Message 2 of 8
Anonymous
Not applicable

Re: Reduced Credit Limit

Uborrow is right, zero percent of zero is still zero. So your util is still 0%. I sound like Yogi Berra don't I.

 

 

Message 3 of 8
bamagirl1
Established Contributor

Re: Reduced Credit Limit

goodbye hsbc!

 

I luckily have NOT been hit by any lowering of my credit lines..After reading the OP post I decided to check my hsbc mc (orginally $3400 limit) and hsbc discover (orginally $1000 limit)

 

well both of them have been CLD TO $300  WTF!  I owe zero except on 1 card out of all the cards I have..I've not had any over the limits or any recent inquiries..

 

So I guess Hsbc has made my decision for me I'm closing both card..I think both had annual fees anyway and I have had then since 2007..I just used my BB MC the limit is $2000 I used $20 on saturday, haven't paid off the balance on it but so far that CL hasn't been touched..but I am so angry, but I guess the upside is hsbc made the decision easier for me!!

 

I feel LIBERATED! HAHA

 

~01/2008 Ficos TU 571-EX 647-EQ 652~
~3/21/2009 Ficos TU 705 EX 702 EQ 692~
~9/9/09 Ficos TU 718 EQ 693 EX???
~06/25/12 Ficos TU 719 EQ 677 EX??
Message 4 of 8
oracles
Valued Contributor

Re: Reduced Credit Limit

Hi Govtgal

 

What people must understand, it is not the limit itself that effects your score but the % of util.

 

Therefore a person who has 5k limit but with a balance of 4.5k is worse than a person with a 1k limit and 0 balance.

 

Even though they reduced your limit, you are still good with uitl%.

 

Word of caution, you should have at least 1 card reporting a very low balance of maybe $5. Less than 5% util%.

 

You will get ding for not using credit if all your credit cards are reporting a balance of 0.

 

Make sure you use all credit cards at least once every 3 months so they do not close your cards due to inactivity.

 

hope this helps

Message 5 of 8
Anonymous
Not applicable

Re: Reduced Credit Limit

(My example shows that it does and did affect my FICO dramatically) 

 

I got an alert that my balance was within 500 of my CL. Shocking, since I hadn't used it. Sign in to find my 5k CL on my Discover and 7500k CL Mastercard is now $300.

The worst part about is that I recieved a credit monitoring alert yesterday saying that my credit score has changed by 20 or more points. Upon checking these 2 CL decreases lowed my FICO Score from 742 mid to 703, a 39 point drop. I used these cards every couple of months as HSBC had cancelled my Visa about 12 months ago for inactivity of 6 months or more. I do have a WAMU account but fail to see the connection as they were bought by Chase. I have about 12 open account including my mortgage with GMAC and never go over 10% and always pay in full. Live in Wisconsin, no car payments and 5 years left on my mortgage. I have a feeling that they are positioning themselves so their books reflect a very high debt load for a government handout.

Message 6 of 8
Uborrow-Upay
Valued Contributor

Re: Reduced Credit Limit

SupportOur2ndAmendment, just to clarify, lowered credit limits most definitely do impact a credit score if there are reported outstanding balances on any of the credit accounts. The utilization % does increase, and the credit score decreases.

 

The OP gave us a scenario in which all balances on credit accounts were at 0. In her situation, her utilization % remains at zero, regardless of the dollar amount of total available credit. Raising or lowering of her credit limits would have no impact for her, at least as far as the utilization is concerned.

 

Sounds like you're in pretty good shape, and since you PIF on the accounts you do use, perhaps making the payments before the statement closing dates will bump that score back up to where it should be, regardless of the CLD's. Your reported balances would then be at zero, too...and so would your utilization!

 

Have a good one!

 

Message Edited by Uborrow-Upay on 02-20-2009 06:47 AM
Message 7 of 8
haulingthescoreup
Moderator Emerita

Re: Reduced Credit Limit

This looks to be across the board for a lot of people, and I don't think that it's necessarily tied to usage, etc.

HSBC needs to get the amount of extended credit on its books lowered PDQ, and this is how they're doing it. AmEx started it, others have done it, HSBC's doing it now, who knows who's next?

For all those who have said that keeping all CC's paid to $0 before the statement except one showing $10 is just a game to manipulate scores, here's the new reality. If you have balances and get CLD's, your util will rise, at least temporarily. The only protection against a util increase and possible drop in scores is to have only minimal balances.

This is hard for those who are scrambling to hold on to their jobs and make their current payments, I know.

HSBC credit line slashed for no reason!!!
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 8 of 8
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