Reply
New Member
amandag
Posts: 4
Registered: ‎08-26-2007
0

Requesting Limit Decrease?

Is it a bad idea to request a credit limit decrease on a card?   I have 4 credit cards and all of them have outrageous interest (they were all applied for while I was in college) but one of them is about 24% interest and it has a $20,000 limit.  It has 0 balance because it would be stupid to charge anything at that interest rate (my others aren't much better though...all in the 20s).  The only balance I have on any is a $2,000 balance on my Discover card which was books, etc from my last semester of college.  I plan to pay that with my next paycheck.
 
I guess in the scheme of things, the limit doesn't matter because I don't plan on using the card but it does make me nervous to have a card that someone could steal and literally charge a car too.  Would my FICO score go down if I request a limit decrease if I pay the discover card off at the same time (UTL % would stay the same)?  Would it be better to cancel the card altogether? It's my oldest card.
 
I also wonder if a bank would give me a house loan someday if I have a $20,000 card.  Seems like a crazy amount of credit to me...especially since I was a student until this May.  They just wanted me to get into trouble.
 
I plan to call the banks and ask for interest decreases too.
Moderator Emerita
Community Leader
Epic Contributor
haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007
0

Re: Requesting Limit Decrease?

[ Edited ]

amandag wrote:
I also wonder if a bank would give me a house loan someday if I have a $20,000 card. Seems like a crazy amount of credit to me...especially since I was a student until this May. They just wanted me to get into trouble.
I plan to call the banks and ask for interest decreases too.


Don't know about the other effects, but I have read that sometimes mortgage lenders will request that a potential borrower get the limits lowered on their cards. The poster said that s/he explained to the CCC what was going on, they lowered the limit, and then after the closing and final funding (forget the exact term), they put it back where it was.

If you're worried about theft, ask your CCC what they recommend. There are protections for card owners if cards are stolen. If you're really worried, you could rent a safe deposit box at a bank for $10/ year and park them there. Just take them out twice a year to buy a pack of gum and then stick them back in.

I don't think that I would lower them unless a specific reason arose to do so. But definitely, get them to lower the rates. Tell them that you're getting offers for 0% balance transfers, and do they want to keep you as a customer or not?

Message Edited by haulingthescoreup on 10-06-2007 08:56 PM
* 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
Senior Contributor
ilovepizza
Posts: 3,071
Registered: ‎05-17-2007
0

Re: Requesting Limit Decrease?

I felt the same way at your age. I reduced my credit lines and canceled unused cards. It will hurt you to cancel this card 10 years from now. Discover is one of my oldest cards and thankful I didn't cancel it years ago. You can keep the card stuck away or just cut it up if you have to. Just don't cancel the account. Yes it takes some responsibility because you will still have to check discovers site each or other months to make sure no fraud charges are there. I do that for all my cards monthly. You can probably set up e-alerts for charges so you don't have to check it all the time. That $20k CL is your friend. It shows that you can control spending and not use it. Not using it is also part of your score. Your goal is to have 10-25x what ever you normally spend for a CL. You are protected from fraud up to 90 days so check your card at least ever 2 months if no activity. I pull my credit report at least monthly. Thats even enough to keep an eye on your accounts. Now if you can't fight temptation of spending then you have to reduce the CL. Maybe you can't sleep at night. I found most fraud hits up for a few hundred and then they stop using the cards. $2,000 or $100,000 CL on a card will still probably only get hit up to $2,000. But what ever you do, keep this card for life if you can even if you reduce the CL to $500. Never cancel your oldest card unless it costs you money. You will remember reading this post in 10 years when you still have this card holding up your scores for mortgages.. :smileyhappy:
If we never set higher goals we would never get as far.
sol, credit 101, acr, abbreviations, calc
Moderator Emeritus
HappyDays
Posts: 7,326
Registered: ‎06-18-2007
0

Re: Requesting Limit Decrease?



amandag wrote:
Is it a bad idea to request a credit limit decrease on a card?   I have 4 credit cards and all of them have outrageous interest (they were all applied for while I was in college) but one of them is about 24% interest and it has a $20,000 limit.  It has 0 balance because it would be stupid to charge anything at that interest rate (my others aren't much better though...all in the 20s).  The only balance I have on any is a $2,000 balance on my Discover card which was books, etc from my last semester of college.  I plan to pay that with my next paycheck.
 
I guess in the scheme of things, the limit doesn't matter because I don't plan on using the card but it does make me nervous to have a card that someone could steal and literally charge a car too.  Would my FICO score go down if I request a limit decrease if I pay the discover card off at the same time (UTL % would stay the same)?  Would it be better to cancel the card altogether? It's my oldest card.
 
I also wonder if a bank would give me a house loan someday if I have a $20,000 card.  Seems like a crazy amount of credit to me...especially since I was a student until this May.  They just wanted me to get into trouble.
 
I plan to call the banks and ask for interest decreases too.



speaking for myself......I would never ask for a CL decrease!!!!!  I would ask for lower int.  Also use each card once or twice a year....how much you charge doesn't matter....this is just to keep the card active.
 
CC with high CL  are very hard to get.  You have no idea what you might need them for down the road.
 
I have total CL of $50,000.......i do not use it all..... UTIL should  be under 10%  for best scores.
 
I use one card all the time and others just to keep active.
 
As long as there are no late payments it will age as a good TL
New Member
kei31982
Posts: 9
Registered: ‎09-16-2007
0

Re: Requesting Limit Decrease?

There is an article with one of the news channels (you can propably google it) that will actually give you a script to help you get your interest rate lowered. That would be the first place to start.
As of 10/6/07 Equifax 610 Experian 596 TransUnion 602 Baby steps. Gotta make it to 620!!!
Valued Contributor
Lady_Scarlet
Posts: 2,385
Registered: ‎09-10-2007
0

Re: Requesting Limit Decrease?

Between myself and DH we have 6 cards that are more or less 'dormant' - thought of paying our monthly utility and other fees with them (all set expenses more or less) - i.e. the electric bill charges to the card and then 3 days after the statemnt is cut they receive a payment via Billpay - keeps them active -- and we don't carry any of those cards, they sit in the safe.
Now a member of the UNOFFICIAL 700 Club - Plus scores of 734-734-747
Valued Member
AZQ
Posts: 41
Registered: ‎09-29-2007
0

Re: Requesting Limit Decrease?

I'm a n00b here and I thank all of these great people who post because they are a wealth of information. I just recently went through a little credit hiccup when my ficos dropped below what I'm used to seeing. Here's some recent revelations I made while working on my credit scores, and thankfully now I'm back to all above 720's. Keep in mind that doesn't make me an expert like the great people here just makes me aware.

Your question about open credit lines. Lenders and your fico score like to see that you use credit but that you use it responsibly. Having high credit limits is a good thing especially if you ever have to use your credit cards for an emergency and you don't want your credit to suffer for it. Here's an example:

Based on the fact that creditors like to see your credit used to credit limit utilization at or about the national average of 7% on any given trade line you can then use that formula on your current revolving cards.

Lets say you have a 20,000 dollar credit line. You can safely charge on that card without impact to your credit score 1,400 dollars. That's not a lot when you stop and think about it. You could easily use that up if lets say your car breaks down or you need a new bed.

In answer to your question I wouldn't lower the credit limit on your card(s). You've earned them and that's why they are there and keep in mind the creditors like to see them and they impact your fico scores positively if not abused.

In a perfect world you always want the lowest possible credit utilization but we don't live in a perfect world and the creditors and CRAs don't play by the perfect rules. Here are some more helpful hints you may or may not know.

Open trade-lines. If you have more than 5 you will be scored down for that. Pay off trade-lines or balance your debt onto less than 5 trades then pay it down so it's less than 30% of your combined credit lines. It hurts your fico scores less to have a trade line at 50% usage than it does to have more than 5 trade lines with balances. Fico sees a lot of trade lines open as mis-use of your credit. Consolidation I guess is the key here and it helps your credit score. Plus all the open lines with zero balances help your credit score so it's a double win.

I've read here about a lot of folks using their cards for monthly bills and then paying them off each month. This is a risky business if you don't want it to impact your score and it differs with each person and creditor creating a lot of variables. The one sure thing is that if your monthly bills are less than 7% of your available credit then it won't hurt at all but will help because fico likes to see recent credit usage and scores it positively. (read: responsible credit usage) I'll give you some food for thought here and then let you make up your own mind about this.

Most credit card creditors play fair and by this I mean they report to the CRAs at the time your monthly statement is generated. This does two things. It allows you to charge for the month and pay it off by the due date without it appearing on your credit report. Remember that your due date is usually always before (read: day or days) your statement date. In this scenario where you've paid on or preferably before the due date your statement will cut and show a zero balance and that zero balance is reported to the CRAs. No harm no foul situation but it doesn't do anything for fico because remember fico likes to see responsible credit usage. If you want positive points for usage you'll need your creditors to report a balance ideally less than 7% of your credit limit and by all means less than 30% of your combined credit limits. For more positive points from fico pay it off the next month at your due date and your creditor will go back to reporting a $0 and that's healthy.

Now lets mention the creditors that play by their own rules. I won't mention names but there are trade lines that report without regard to the statement date. These creditors can either help or hurt your score. In the scenario where you pay your bills every month with a card like this and your total monthly bills are 90% of your credit line but you pay them off every month it going to affect your credit score if your creditor reports mid cycle between your statements. In this scenario you're going to get negative points from fico because the useage to credit line is too high. So know your cards and know which ones play by the rules and which ones don't. I had to learn this the hard way because there's no magic rule and the customer service people at your creditors won't tell you unless you talk directly with their credit department (read: the people who manage the reporting to the CRAs and such). The only place I found these dates was on reports pulled from TrueCredit.* (I'm not selling their service just saying that's where I found them maybe others know of some other place.) Even there you have to be crafty to find the date of report to the CRA. If you get a triple report there you can see what each of them are showing as the report date. Why I say you have to be crafty is because some CRAs like Equifax only report month / year, but others will report month / day / year. :smileywink: Anyway the bottom line here is know your creditors as well as they know you. Use your cards to your benefit not theirs.

One final thing and then I'll put this response to bed. There's more information on a credit report than just what you see on most "consumer" stripped reports. As an example Experian keeps a record of your credit card usage as reported by the creditors each month. So lets say you have a card that's 5 years old a creditor can see what the balance was each month it reported. They can see periods of high usage, no usage, and responsible usage. The thing that kills me about this is that if you make a big purchase they can see how long it takes you either to pay the balance or slowly eat away at it. Remember responsible usage is key and the CRAs report it, don't think for one minute that any creditor doesn't know everything about your credit usage even if you go in with zero balances on everything thinking how will they know I was 40K in debt 2 months ago. Another complaint I have is that some CRAs allow for a "worst trade" mark to be placed on your file. So lets say you've had some problems in the past, you've paid them off and had them removed or you allowed them to run out the statute of limitations (SOL) on your file. If a creditor has flagged you prospective creditors can see it. You can have great credit and 5 worst trades and you'll find yourself wondering why you got denied. I found this little industry secret by reviewing my personal report one of my lenders gave me which is highly frowned upon in the credit industry because they don't want you to know about all their secrets or we'll figure out a way to fix those too and make our files completely accurate. Luckily I didn't have any but when I saw the line that said "worst trade = 0" I immediately had to ask what it was. One thing I can say about this is again responsible credit. If you get into trouble work with your creditors to get out. If you let something go to collections and charge off status you may get flagged worst trade and those are impossible to fix because there's no way of telling who placed it and if you did know and called them they'd probably deny that they have that ability anyway, but they do.

Always check your credit reports. Remember the CRAs are a repository of the information given to them by your creditors. If your creditors report to the CRAs a wrong address, spelling of your name, etc those need to be fixed. Fix them with the CRAs and then check with all your creditors to make sure they have the right information on file for you. Creditors like to see all the personal information match up. They also like to see a phone number in your personal information as it helps provide them with stability and as we all know stability and responsibility are the two key factors in any FICO score. :smileyhappy:

Okay that's it from the peanut gallery I hope I've helped share what I've learned.

- AZQ


PS - Want an immediate jump in your score? Pay 10% of your outstanding revolving debt in any one month and watch your numbers climb.

myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Click to Verify - This site chose VeriSign SSL for secure e-commerce and confidential communications.
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+
}