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Reasons for credit line reduction
Question: What is a credit line reduction, and what are some reasons for why my credit card company would reduce my line of credit?
Answer: A credit line reduction is exactly what it sounds like-your bank is reducing the amount of credit available to you. A credit line reduction can be made at a consumer's request. For example, if you have loaned your credit card to your daughter, butwant to make sure she doesn't spend too much money, you could call the bank and have your credit limit reduced.
On the other hand, your credit card companies may decide on their own to reduce the amount of available credit extended to you for several reasons. Primarily, credit line reductions result from a bank deciding that you are too great of a credit risk to maintain the credit limit it had previously extended
you. Credit line reductions usually occur after a review of your credit report, which most banks conduct on a periodic basis. If your credit score has dropped significantly since the last time the bank reviewed your credit report, the bank may decide to reduce your credit limit or cancel your card altogether. A credit line reduction may indicate problems with your credit history, so you may want to pull a copy
of your credit report and review it to try to identify the source of the problem.
Bills.com has more information to solve all of your credit issues and credit solutions at: http://www.bills.com/credit-solutions/
I hope this information helps you Find. Learn. Save.
Best,
Bill
www.bills.com
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1. Posted by kelly on Sunday 25th May 2008 22:48
I recently applied for an instant credit online with discover card and was approved. a few days later my card arrives and it states my credit line to be $6000. I called to activate a PIN # and on the telephone the automated customer service also said I had $6000 available. I used the card. I got a call verifying it was me, blah blah for security. A day later I log on to see how their online deal is set up. Online it says my credit is $600 and I am already over my credit limit!! I sent an email and they replied that they have sent me a letter to explain. I am very familiar with my credit report and in fact I pulled it today to verify nothing crazy has happened. My average score among all 3 reporting agencies is 716 with my only problem being the amount of credit I have and that is used. I have zero late payments. I find it outrageous that they would cut my credit back by $5400 without even notifying me in a more prompt manner than mail!?!? (but they can CALL me within hours of my first use of the card?!) Is that even legal? (of course it is, they can do whatever they want!) Can you advise?
2. Posted by Bill on Tuesday 27th May 2008 08:28
Unfortunately, buried in the fine print of their agreement, you will find that they only need to notify you by mail for the credit line reduction. I understand that $5400 reduction is over the top, but in all probability it is because of your credit line utilization, which is basically the total amount of revolving credit used as opposed to the available credit. Anything over 50% will make lenders weary to issue more credit. You have limited options as I am pretty sure they will not raise the credit limit until at least 6 months have passed. My only suggestion, in case you do not want to keep this account is that you payoff the amount and close the account.