What does it mean when a bank lowers my credit limit?

I have not used my credit card in about 6 months and I have been paying way over my minimum payment every month. All of a sudden my credit limit is lower by 1,500. Why? does this effect my credit score.|||Ryan M, you couldn't be more wrong.





To the original poster, if your credit guarantor is one of the larger companies such as B of A, Chase, Citibank, GE Money Bank, you are not alone. People with excellent credit have had their credit limits slashed, interest hiked and accounts closed outright for various answers such as "economic climate", "low revolving debt to credit ratio" (in English, that means you aren't using your card enough), or "we found something on your credit report" (GE Money Bank's favorite), but when you pull your report, you won't find any changes, and in fact, you won't find evidence that the creditor has done a soft pull.





So, to answer you, they did it because they could and it's probably not due to anything "bad" that you have done. 40% of all credit guarantors have summarily lowered credit limits on their customers for no discernible reason. Other guarantors have initiated membership fees on accounts that previously did not have them. And still others hiked interest rates to, in some cases, triple of what they were in anticipation of the new credit card legislation that was recently passed.





And what's worse, if this is an old account and/or has a high credit limit, closing the account will ding your FICO, in some cases, considerably. We took a three digit hit when a 15 year old account with a high limit was closed out from under us because we didn't use it enough. However, we were cheerily informed that we were "welcome to open another account at any time we need credit services in the future". No thank you.





And yes, it may affect your FICO because your credit utilization ratio has been artificially increased. How much it may be affected is open to debate. See this for more info: http://www.creditscoring.com/creditscore鈥?/a>|||A lot of the banks like to cut the limit on your cards if you dont use them frequently. A good rule of thumb is to use it every 3 months so that your account stays open. Yes this COULD hurt your score if you carry high balances on most of your cards.





Example: If you used 3000 out of 5000 total availiable credit and your card cut you 1500. Your now at 3000 out of 3500 credit used. Which is VERY high according to the credit lenders. Your score will drop.





But say you had only 100 dollars used out of 4000$ availiable credit limit. Your score will not suffer so much. if your cut 1500$ because your utilization rate is still quite low.





100/2500= less than 10% utilization rate. Which is still good.|||Credit card companies are acting a fool right now because of the credit card reform. This does effect your credit score because it lowers your available credit / debt ratio. However 2 things you can do.


1. Call and ask for an increase in 3months.


2. Pick up your phone right and say "im calling in to lower my apr" then pause. That should save u money in fees if they lower it.





good luck!|||The "Why?" part only your bank can answer. Probably because they deemed you a credit risk. Yes it will affect your credit because it will raise your debt to available credit ratio...which is a HUGE part of your credit score.