Dear Liz: I have three credit cards. In 1996 I got a platinum MasterCard affiliated with my alma mater. Over the years, the issuing bank raised my credit limit from $10,000 to $36,200.
Now it has lowered my limit to $18,000 and I’m upset because that might also lower my FICO score from 816 to whatever. I e-mailed the bank asking why it did that, and it said I don’t need all that credit because I haven’t ever used that much. What can or should I do? I have worked very hard to build good credit, and I don’t want to lose it because of this.
Answer: Whether you should be upset depends on how much of your available credit you regularly use.
If you only ever use a fraction of your available credit, even a large reduction in your credit limit shouldn’t send your scores plummeting. For example, if you don’t charge more than 10% of the new limit, or $1,800 a month, your scores are unlikely to suffer much, if at all.
That said, you don’t have to passively accept the bank’s decision. Your high credit scores mean that you would be a desirable customer for any lender. If you call your issuer and (politely) threaten to take your business elsewhere, you might find at least some of your old credit line restored.