Any downside to self-initiated major CLD?

[Anonymous]

I have a card that I don't plan to use much if at all any longer.  I was going to close it, but it's my oldest revolver so it now resides in my SD.  Is there any drawback to requesting a maximum credit line decrease on this card, bringing it down to the lowest limit the creditor will allow (say $500?).  Would that cause any problems, such as being a bad "look" to my other creditors or anything.  Looking for opinions on this.  Thanks.

[Adidas]

I've wondered this too and look forward to hearing some thoughts. As a follow up question is there any benefit to lowering your CL? Are companies more likely to close unused accounts if the CL is high? Or alternatively does a CLD raise some flags that make them look into your account and potentially decide to close it.

[RobertEG]

A consumer has the choice as to how much of an approved credit limit they choose to use.

I am curious as to why a consumer would want an approved credit limit to be lowered.

What is the benefit to having your CL lowered?

[Thomas_Thumb]

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@Anonymous wrote:

I have a card that I don't plan to use much if at all any longer.  I was going to close it, but it's my oldest revolver so it now resides in my SD.  Is there any drawback to requesting a maximum credit line decrease on this card, bringing it down to the lowest limit the creditor will allow (say $500?).  Would that cause any problems, such as being a bad "look" to my other creditors or anything.  Looking for opinions on this.  Thanks.

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Looking at my Experian credit report it does list credit limit for the last two years. Let's assume your card has a $10,000 CL. If limit has not changed it would say something like:

 - Between November 2014 and October 2016 your credit limit/high balance was $10,000

Now if you drop it to $500 this month and check your report in February it would show

 - Between January 2015 and December 2016 your credit limit/high balance was $10,000

 - Between December 2016 and January 2017 your credit limit/high balance was $500

There is no place for comments regarding CLD - so you can't tell if it was initiated by the consumer or creditor. Frankly, I don't think it is an issue particularly if your other cards don't show corresponding CLDs. A good source on info on this might be NRB525 as he went through a number of CLDs a couple years back. Recently he reported scores above 800 up from the low to mid 700s in early 2015.

[Anonymous]

My worry would be that upon an AR of my credit report another creditor would notice the CL reduction and lower their line as well.  

Might be ovethinking it though.  

[Anonymous]

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@RobertEG wrote:

A consumer has the choice as to how much of an approved credit limit they choose to use.

I am curious as to why a consumer would want an approved credit limit to be lowered.

What is the benefit to having your CL lowered?

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I have a SD card that I no longer use that I would like to use for FICO testing purposes.  It's a lot easier with a card with a limit of a few hundred bucks to test different utilization thresholds and such than a card with a limit in the thousands.  Since the card is just sitting in the SD doing me no good, I figured taking out it and giving it a CLD would be useful as it would allow me to play with utlization and come up with some data points relative to my profile.

[Anonymous]

I am just seeing this thread.  BBS and I are friends and he asked me my take on this earlier today.  Here is what I told him, just in case it might be of interest to the other folks in the discussion.

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You'll certainly help the rest of us if you have a credit card with a small credit limit.  You can do some very cool testing ESPECIALLY with the question of when does an "individual utilization" penalty begin (assuming you keep your total U in the 1-5% range). 

You will experience a decline in one scoring factor of the scoring models used by the insurance industry, as well as the one used by Vantage.  That factor is average credit limit.  But just because one factor has a lower value doesn't mean that your score will go down.  (Example: one's CC utilization could go in a "bad direction" -- from 2% to 7% say -- but that would not cause you to lose any scoring points.  Similarly one could go from an AAoA of 2.6 to 2.4 with no scoring impact.)

Even if your score does go down, it might only be by a couple points.  And finally, even if it went down by many points, you'd have ask whether you care.  Certainly the CLD will have zero impact on FICO.

The question you raise about a manual review is something to consider.  The CLD will be visible to any creditor who looks at your report buried in that account's trended data) but they might have to be really looking for that.  It's certainly not a derog or anything like that.  And it's unclear to me who would care.  But of course it's conceivable someone might.

One possibility is to reach out the card issuer and ask them whether they can give you a termporary CLD.  Just explain that for personal reasons you are considering lowering your CL for a brief time (e.g. six months).  Ask whether it would be possible to document that this is just a temporary CLD and that they will raise it back up later.

[Adidas]

Thanks for posting that CGID. It was helpful. For some reason I thought adverse actions like CCC initiated CLDs factored into FICO as a derog. Good to have that cleared up. So you've said very clearly it doesn't have any negative impact on FICO scoring assuming UTIL is the same. What I'm wondering is there any benefit to a CLD? Specifically if you SD a card permanently are you less likely to have your account closed with a lower limit?

[Anonymous]

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@Adidas wrote:
Thanks for posting that CGID. It was helpful. For some reason I thought adverse actions like CCC initiated CLDs factored into FICO as a derog. Good to have that cleared up. So you've said very clearly it doesn't have any negative impact on FICO scoring assuming UTIL is the same. What I'm wondering is there any benefit to a CLD? Specifically if you SD a card permanently are you less likely to have your account closed with a lower limit?

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I don't know.  I suppose it is possible that a credit card company could regard a 30k card that is unused for three years as more of a problem than a $300 card unused for the same period of time  Depends on how its internal system works. 

It's a bit of a hyper-theoretical question though.  In practice if you feel like it would be a problem for an issuer to close a card of yours, the simpler thing to do is to use it every six months, rather than request a CLD and then never use it.

[manyquestions]

If you want to create a $500 card for testing utilization and you have two Chase cards, you can call them and reallocate most of the limit from one Chase card to your other Chase card. I've done the same thing with AMEX cards online. With some creditors they have rules about how old the cards need to be or how often you can move limits, but all in all I have never experienced anything negative from it.