Is this a smart way to increase my credit score / reduce utilization???

[HeavenOhio]

From a scoring standpoint, you'd want to do the decrease after you've paid the card down rather than as you go along. You don't want your card to be maxed if you can help it. And you might want to avoid creating a situation on your credit report that makes it looks like you were being balance chased.

[jeboles]

What do you mean by credit report showing as balance chased?  Also, the card is about maxed out now.  Leaves me with 2 options:  Do the credit limit decrease game, would take about 3-4 weeks to get to $500, but with no utilization, or keep paying it down slowly, which will show high utilization for around 8-9 months.  Which would be more useful in that situation.

[SouthJamaica]

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@jeboles wrote:

I have a Secured Navy Federal Credit Card that has a $4400 spending limit.  Currently it is around $4350 used.  Would it be a good idea to pay around $500, decrease the limit by $500 and use the money I get from decreasing the limit to keep going till the card is around $500. My end goal would be to have around a $500 card limit instead of $4400, but almost no utilization

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1.No don't reduce your limits. Just pay down your balance.

2. Try never to have any revolving account at greater than 28% of the limit.

[jeboles]

OK, I will pay down the balance then.

[dynamicvb]

OP, you did not mention your scores, but is this a secured card because you can’t obtain an unsecured or a loan that would cover the amount owed? If it was possible to get another one, then do a balance transfer or pay off this card if a loan. Then cash out your secured card and pay off the new one. Would still get the debt and utilization paid down using the funds you have on the secured card. You would take a hit for the inquiries and new account age, but I think the utilization gains would offset that hit.

this would be another way for you to accomplish your original goal. 

[jeboles]

My scores are way to low for another loan. They are in the low 500. Working on bringing them up. Would paying $1000, then dropping the limit $500 at a time work without any weird penalties.

[Anonymous]

It sounds like you need the money more than you need the scores. The credit information is generally around the idea that higher FICO scores is te most important thing. If your scores are in the low 500 your original plan can't possible hurt them. You are maxed out now. Being maxed out at a lower credit limit is the same thing.

The other thing to consider is I don't know if your bank is going to even let you do that. I have two secured cards and reducing the limit is not an option at my bank. My only option is to close it and get my money back (but I have to pay it off to $0 first). Your bank may be differnt. Also I am not sure how the bank will react to you calling every month to reduce your limit.

[Anonymous]

+1 What ImTheDevil & SJ said.

Do not lower your limits unless that’s the only way to avoid getting a late payment on your record. Pay the card down. As said above, utilization has no memory. once you pay it, then you get the points back.

You need to concentrate on timely paying your debts and working towards and maintaining low utilization. Everything else will fall into place if you do that.

[jeboles]

I don’t need to lower it to avoid a late payment. I am just dreading that almost half the payment goes to interest.

[Anonymous]

OP, I'm not understanding what self-lowering your limit would accomplish, so perhaps you can better explain your thoughts on this.  Lowering your limit as you pay down your balance only forces your utilization to stay maxed out.  I'm not seeing how there would be any benefit in that, unless there's something obvious that I'm overlooking.