topic Re: Credit Limit lowered after making large payment in Credit Cards

Credit Limit lowered after making large payment

CorySoccer — Sat, 23 Jan 2021 21:07:01 GMT

Hello all!

New to the forum, so thank you all for the advice so far!

Here's what happened. I have a Home Depot credit card. My credit limit was $2,200. My balance was pretty much right at the max limit. For the past year or so I've been making regular payments. I recently made a large payment in the amount of $1,500 to make my balance around $650. A week later, Home Depot lowered my credit limit to $800.

I was furious. After speaking with gobs and gobs of people who said it was because of something in my credit history (which isn't true because I monitor it constantly, and nothing negative was reported, in fact, in the past 2 months, my credit score has increased 60+points.

I finally got a hold of a lady who basically said...when you made that large payment, we lowered your CL to just a little over your balance. So I asked..."So, you're telling me, had I kept my balance at $2,200 and kept making the minimum (or close to it) payments, my limit would have stayed at $2,200? She said, yep. She said they aren't allowed to lower your credit limit to below your balance. So I asked her, if I had only paid $1,000, leaving me with a balance of $1,200, you would have lowered my CL to about $1,300 or so? She said yep.

This is news to me.

Anyone else heard of this?

So now the lowered CL will be reported to the credit bureaus. My credit utilization percent will not be low as it would have been had I been able to keep the CL of $2,200.

Guess I'm just frustrated that my credit score will probably lower after paying off this card (I am going to pay the rest of it off here shortly). Who knows what they'll lower my credit limit to after I have a zero balance? What a $10 CL? lol

Re: Credit Limit lowered after making large payment

Anonymous — Sat, 23 Jan 2021 21:12:27 GMT

it is called balance chasing

once it is paid off there are a couple ways it could go:

account closure

limit slashed even lower, maybe to 150-300?

nothing

you can CLI

I doubt your score would become lower from what it used to be as compared to now with the lower CL, since at either CL they were nearly maxed out. If you have other cards your total use may even be lower

Pay it to 0 and your scores would be better

Re: Credit Limit lowered after making large payment

Anonymous — Sat, 23 Jan 2021 21:21:16 GMT

@CorySoccer wrote:
Hello all!

New to the forum, so thank you all for the advice so far!

Here's what happened. I have a Home Depot credit card. My credit limit was $2,200. My balance was pretty much right at the max limit. For the past year or so I've been making regular payments. I recently made a large payment in the amount of $1,500 to make my balance around $650. A week later, Home Depot lowered my credit limit to $800.

I was furious. After speaking with gobs and gobs of people who said it was because of something in my credit history (which isn't true because I monitor it constantly, and nothing negative was reported, in fact, in the past 2 months, my credit score has increased 60+points.

I finally got a hold of a lady who basically said...when you made that large payment, we lowered your CL to just a little over your balance. So I asked..."So, you're telling me, had I kept my balance at $2,200 and kept making the minimum (or close to it) payments, my limit would have stayed at $2,200? She said, yep. She said they aren't allowed to lower your credit limit to below your balance. So I asked her, if I had only paid $1,000, leaving me with a balance of $1,200, you would have lowered my CL to about $1,300 or so? She said yep.

This is news to me.

Anyone else heard of this?

So now the lowered CL will be reported to the credit bureaus. My credit utilization percent will not be low as it would have been had I been able to keep the CL of $2,200.

Guess I'm just frustrated that my credit score will probably lower after paying off this card (I am going to pay the rest of it off here shortly). Who knows what they'll lower my credit limit to after I have a zero balance? What a $10 CL? lol

Yep,

As the previous poster stated, it's called balance chasing. Basically, the creditor sees something in your profile or in your spending/payment behavior that spooks them (perhaps specifically during the economic climate we find ourselves in with the pandemic) and as a result is using this as an opportunity to reduce their exposure with you.

It could be that they feel if you charged the card up again, you wouldn't be able to pay it off, so they are making sure that doesn't happen. Based on my experience, they'll continue to cut it as you pay it off until its either closed or the limit is really low. As the other poster said, there's not much you can do except either decide if you want to pay it off, close the account, or take the chance of requesting CLI down the road but they will likely decline as it seems they have made their decision.

For what it is worth, it does happen, and it's happening more often than usual due to the economic circumstances a lot of people find themselves in.

Re: Credit Limit lowered after making large payment

Anonymous — Sat, 23 Jan 2021 21:39:14 GMT

@CorySoccer wrote:
Hello all!

New to the forum, so thank you all for the advice so far!

Here's what happened. I have a Home Depot credit card. My credit limit was $2,200. My balance was pretty much right at the max limit. For the past year or so I've been making regular payments. I recently made a large payment in the amount of $1,500 to make my balance around $650. A week later, Home Depot lowered my credit limit to $800.

I was furious. After speaking with gobs and gobs of people who said it was because of something in my credit history (which isn't true because I monitor it constantly, and nothing negative was reported, in fact, in the past 2 months, my credit score has increased 60+points.

I finally got a hold of a lady who basically said...when you made that large payment, we lowered your CL to just a little over your balance. So I asked..."So, you're telling me, had I kept my balance at $2,200 and kept making the minimum (or close to it) payments, my limit would have stayed at $2,200? She said, yep. She said they aren't allowed to lower your credit limit to below your balance. So I asked her, if I had only paid $1,000, leaving me with a balance of $1,200, you would have lowered my CL to about $1,300 or so? She said yep.

This is news to me.

Anyone else heard of this?

So now the lowered CL will be reported to the credit bureaus. My credit utilization percent will not be low as it would have been had I been able to keep the CL of $2,200.

Guess I'm just frustrated that my credit score will probably lower after paying off this card (I am going to pay the rest of it off here shortly). Who knows what they'll lower my credit limit to after I have a zero balance? What a $10 CL? lol

@CorySoccer it apparently was something in your credit history, you had the card maxed out for a year only making small payments correct? If so, my guess would be that spooked them, especially in these economic circumstances, hence the balance chasing.

Re: Credit Limit lowered after making large payment

FinStar — Sat, 23 Jan 2021 22:02:50 GMT

@CorySoccer wrote:
Hello all!

New to the forum, so thank you all for the advice so far!

Here's what happened. I have a Home Depot credit card. My credit limit was $2,200. My balance was pretty much right at the max limit. For the past year or so I've been making regular payments. I recently made a large payment in the amount of $1,500 to make my balance around $650. A week later, Home Depot lowered my credit limit to $800.

I was furious. After speaking with gobs and gobs of people who said it was because of something in my credit history (which isn't true because I monitor it constantly, and nothing negative was reported, in fact, in the past 2 months, my credit score has increased 60+points.

I finally got a hold of a lady who basically said...when you made that large payment, we lowered your CL to just a little over your balance. So I asked..."So, you're telling me, had I kept my balance at $2,200 and kept making the minimum (or close to it) payments, my limit would have stayed at $2,200? She said, yep. She said they aren't allowed to lower your credit limit to below your balance. So I asked her, if I had only paid $1,000, leaving me with a balance of $1,200, you would have lowered my CL to about $1,300 or so? She said yep.

This is news to me.

Anyone else heard of this?

So now the lowered CL will be reported to the credit bureaus. My credit utilization percent will not be low as it would have been had I been able to keep the CL of $2,200.

Guess I'm just frustrated that my credit score will probably lower after paying off this card (I am going to pay the rest of it off here shortly). Who knows what they'll lower my credit limit to after I have a zero balance? What a $10 CL? lol

I'm confused, the thread in mid-December makes no mention of the Home Depot CC or it's balance, (based on the following comment and specifically post #8):

https://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Rebuilding-my-Credit-cancel-cards/m-p/6209143#M634810

"Regarding the 3 negatives on my credit report...1 is from Discover. It was a charge off for $3,200 which is due to come off in April 2021. The other two are collections for $300 from TXU Energy, and the other is $117 from a past bill from 4 years ago.

All of my cards have zero balances and I don't roll over anything from month to month."

Re: Credit Limit lowered after making large payment

Getty59 — Sat, 23 Jan 2021 23:43:58 GMT

@FinStar wrote:
@CorySoccer wrote:
Hello all!

New to the forum, so thank you all for the advice so far!

Here's what happened. I have a Home Depot credit card. My credit limit was $2,200. My balance was pretty much right at the max limit. For the past year or so I've been making regular payments. I recently made a large payment in the amount of $1,500 to make my balance around $650. A week later, Home Depot lowered my credit limit to $800.

I was furious. After speaking with gobs and gobs of people who said it was because of something in my credit history (which isn't true because I monitor it constantly, and nothing negative was reported, in fact, in the past 2 months, my credit score has increased 60+points.

I finally got a hold of a lady who basically said...when you made that large payment, we lowered your CL to just a little over your balance. So I asked..."So, you're telling me, had I kept my balance at $2,200 and kept making the minimum (or close to it) payments, my limit would have stayed at $2,200? She said, yep. She said they aren't allowed to lower your credit limit to below your balance. So I asked her, if I had only paid $1,000, leaving me with a balance of $1,200, you would have lowered my CL to about $1,300 or so? She said yep.

This is news to me.

Anyone else heard of this?

So now the lowered CL will be reported to the credit bureaus. My credit utilization percent will not be low as it would have been had I been able to keep the CL of $2,200.

Guess I'm just frustrated that my credit score will probably lower after paying off this card (I am going to pay the rest of it off here shortly). Who knows what they'll lower my credit limit to after I have a zero balance? What a $10 CL? lol
I'm confused, the thread in mid-December makes no mention of the Home Depot CC or it's balance, (based on the following comment and specifically post #8):

https://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Rebuilding-my-Credit-cancel-cards/m-p/6209143#M634810

"Regarding the 3 negatives on my credit report...1 is from Discover. It was a charge off for $3,200 which is due to come off in April 2021. The other two are collections for $300 from TXU Energy, and the other is $117 from a past bill from 4 years ago.

All of my cards have zero balances and I don't roll over anything from month to month."

Re: Credit Limit lowered after making large payment

CorySoccer — Sun, 24 Jan 2021 00:26:12 GMT

@FinStar Thanks for the trip down memory lane . I didn't feel the need to explain the whole back story, but since you insist, this Home Depot card is my wife's card and when I was working on my credit I was added as an authorized user since it had been opened for a long time with regular on-time payments made to it. I was keeping the situation simple since that information is irrelevant to the question I had asked which was paying down a card resulting in a decreased credit limit. The information provided was accurate information from my wife and I's credit profile.

Re: Credit Limit lowered after making large payment

CorySoccer — Sun, 24 Jan 2021 00:29:29 GMT

@Anonymous @Getty59 @Anonymous @Anonymous Thanks for the information about this "balance chasing" you speak of. In the eyes of the lender (cc/bank etc...) I guess it makes sense if there has been a history of high credit utilization on said card or on other cards. It's now paid off, along with the one other card that was near it's max. How that will affect those cards' credit limits is anyones guess, but having those two cards paid off in full, regardless, is nice to be out from under.

Re: Credit Limit lowered after making large payment

Jnbmom — Sun, 24 Jan 2021 00:31:32 GMT

@CorySoccer

Well you stated "your card" so it was assumed it was your profile and back ground info is usually relevant when giving advice .

Re: Credit Limit lowered after making large payment

HeavenOhio — Sun, 24 Jan 2021 02:24:31 GMT

@CorySoccer, the "something in your credit history" was this card. It hung around its limit for about a year without the balance declining appreciably. I think the underwriting process probably had you flagged for a CLD (credit limit decrease) even before your payment.

While the terms of the card allow for this type of payment situation, underwriting isn't always happy. Some banks tolerate protracted high balances without making them a big deal. Others are pretty fussy. Based on fuzzy memory, I think Citi falls somewhere in between the two extremes.

If you feel the need to drag out a balance, it pays to come here and talk about it. It might be that Card X is a better choice than Card Y for carrying a balance for a few months.

Re: Credit Limit lowered after making large payment

Remedios — Sun, 24 Jan 2021 01:37:14 GMT

Now I'm confused.

Since @CorySoccer is only AU on the account that's gotten CLD, his own CR is irrelevant since wife is the one with issues that led to CLD, but they stated they told them "it's something on their credit report" but also stated "they monitor their report constantly"

🤕

In any case, if you remove yourself as AU, it will stop affecting your scores, but it may cause further issues for your wife depending on who her other lenders are since her scores are impacted and it's her account.

Re: Credit Limit lowered after making large payment

Anonymous — Sun, 24 Jan 2021 02:26:28 GMT

I had issue happening in the past with Synchrony (Care Credit) and bofa over 10 years ago. I got my CareCredit reduced from $3k to $500 (it's back at 12k now) and bofa I was in holiday, was carrying a maxed out balance (5k on a 5k card), paid it off right before vacation trip and got it reduced to $1500.) I got it back up in a few years up to 17.5k but it was around 2010.

pay that card off, and just see what citi does. If they keep it open try a cli in a few months.

Re: Credit Limit lowered after making large payment

hdporter — Sun, 24 Jan 2021 03:10:54 GMT

So, just to be clear, the large payment wasn't the primary reason for the CLD, just an opportunity in which to impose one. As stated elsewhere in this thread, the reason for the CLD was the fact that the line was near maxed out for close to a year. That status of other credit lines, and other past delinquency history, if present, likely played a role as well.

Understand, as well, that while a large payment on an account after a succession of minimum payments can reflect a nice cash inflow put to good use, more often the source of the funds is new debt (sometimes taken on at promotional rates). In this latter case, the large payment isn't a sign that the cardholder is now in a posiiton to more appreciably service debt on the account; just the opposite.

Generally speaking, a CLD imposed by a creditor is a short-term reaction to guard against someone who may be approaching a point where they can no longer meet their payment oblgations and are a default risk. The best response to such an action isn't to withdraw from use of the account, but instead to demonstrate a renewed use and repayment history that restores the creditor's confidence.

Provided that your overall solvency is heathy, a CLD need only be a short-term "burp" in your account relationship. Credit card lending is profitable; creditors are keen to extend credit once reassured you aren't a "bust out" risk.

Re: Credit Limit lowered after making large payment

Anonymous — Sun, 24 Jan 2021 17:12:29 GMT

While the OP having near maxed out utilization on the card for a year or so may have contributed to the balance-chasing CLD imposed, I think that reason is quite secondary to the main issue of having a dirty file (charge off, collections, etc).

On a clean file I've seen people roll with maxed out utilization for extended periods of time and not see any balance chasing when it begins to get paid down. On a dirty file however, you operate under a completely different set of rules. Basically if that one-third/most important part of the Fico pie is in a bad place, then the next one-third/second most important part (Amounts Owed) is going to be even further magnified and sensitive to being less than ideal.

Re: Credit Limit lowered after making large payment

Spotsy — Sun, 24 Jan 2021 17:08:34 GMT

Also keep in mind that credit card companies are employing A LOT of AI (Artificial Intelligence) against big data they have on you, your spouse, other lenders that are connected to you, etc...

Some lenders are getting aggressive with accounts they may feel are moving balances around to other credit facilities ( i.e. doing a balance transfer from Home Depot to a lower rate card) ...only to charge up Home Depot again. In your situation you simply paid it down with cash on hand and their AI tagged it as a different pattern. Also, as another poster pointed out...your payment pattern triggered an AI response to 'balance chase' you. I bet in a couple months if your credit bureau's don't show escalating balances elsewhere, you can get your credit limit back.

Point of all of this is that it is a computer responding to 'perceived' risk due to an abnormal payment occurnace, when there probably isn't any risk at all....AI gone a little bad :-(

Re: Credit Limit lowered after making large payment

Anonymous — Sun, 24 Jan 2021 17:17:33 GMT

While the above may play into it some, the biggest thing to remember is that the greatest risk comes from Payment History issues / having a dirty file. There's no AI needed with that, as it's very black or white.

Re: Credit Limit lowered after making large payment

Spotsy — Sun, 24 Jan 2021 17:49:58 GMT

Hmmmm...if he was a co-signer or the owner of the card I would agree...but the OP was an Authorized User. As stated, the AI is looking at not only the card owner's credit standing, but also all other potential risks factors. AI combines all of these and produces 'actions or recommendations'.

Need to consider spousal's credit standing, payment patterns on other cards, escalating debt (if any)....plus it is a store card with a 2200 limit that lowered...not a 20k limit that was lowered. Text book AI decision making.

Re: Credit Limit lowered after making large payment

CorySoccer — Sun, 24 Jan 2021 18:07:32 GMT

@Remedios I don't recall saying it was anything on "our credit" reports. In fact, as I learned, that it was because my wife's CR had a couple CCs with balances near their limit which was the cause of the drop of the CL unfortunately. Even though her FICO score had increased, it was just those high balances that caused the lowering of the CL.

Re: Credit Limit lowered after making large payment

CorySoccer — Sun, 24 Jan 2021 18:09:16 GMT

@hdporter That's actually an interesting point you brought up regarding how they view that larger payment as being the "opposite" after making many minimum payments. Interesting...hadn't thought of that. Good point.

Re: Credit Limit lowered after making large payment

CorySoccer — Sun, 24 Jan 2021 18:12:17 GMT

@Spotsy HD porter brought up the same point. A point that I had not considered...especially given that much of this stuff is AI/algorithmicly generated. It's this little stuff that goes on behind the scenes as the reason I joined lol. Sometimes what seems like a positive, can be seen as a negative when viewed from the lender/cc/bank's pov.