Advice if Creditor Lowered Credit Line
My credit line on one of my cards was reduced without any notice, will this affect my credit?
Dear Bill, I have some urgent questions and will appreciate your answers as soon as possible. Question 1: I've been paying the minimum payment of one of my credit cards for some time. Last month I paid several times more than the minimum ($2,000), I immediately used $800 after the payment, but immediately following this, it reduced my credit line by $800, making me unable to use it for an important planned shopping online. Is it legal for a credit card issuer to make credit line reduction this way? As I learned from the "Training Manuals of Credit Cards", card companies must send "change of terms" notices to cardholders. Legally, these notices must be sent at least 15 days ahead of the date the change will take effect. Is this right? Question 2: If it's right, can I file a lawsuit against this card issuer? otherwise, what can I do to resume this credit line? Question 3: What are chances of my winning this lawsuit? Question 4: If I close this credit card account on my own initiative, will it affect my credit score unfavorably? or on the contrary, will it improve my credit score? Question 5: If I close this credit card account on my own initiative, can I still pay the minimum till I pay it off, or shall I be forced to pay it off all once immediately? Question 6: How and what shall tell my credit card issuer so that they would restore my credit line if there's such a possibility? (I'm thinking of telling them that if they cut their customers' credit lines, it would make their customers' financial situations more difficult and complicated, and that could probably accelerate their customers' progress of going bankruptcy. Do you think this will be some convincing remarks?) Question 7: Some of my credit card issuers are applying quite high APRs, how and what should tell them for requesting them to lower their rates? Do you think I can use the same remarks as above in the parentheses to persuade them? Your help and answers to the above questions will be highly appreciated, and if necessary, I may seek your professional services in fixing my credit problems. Thank you very much.
The recent downturn in the American economy, which has placed financial strain on banks and other lending institutions, has resulted in many credit grantors trying to control their exposure to risk by cutting back on new lending and reducing or canceling the credit limits of existing customers on products such as credit cards and home equity loans. The New York Times ran a story in June, 2008, exploring the reasons behind these reductions; you can read this article by visiting nytimes.com.
I will try to answer your questions below to the best of my ability.
1) The amount of time before a change to the terms of your credit agreement must be sent depends on your agreement; I encourage you to obtain and review a copy. However, the credit limit provided to you is not a Â"termÂ" of your agreement with the credit card lender, so no notice usually needs to be given for the creditor to change the credit limit. Generally, agreements state that the creditor will provide credit at an amount to be determined by the creditor. I would be very surprised if your agreement required the creditor to provide a set credit limit.
2) You can always sue the creditor; the question is, do you have a viable case? Given the information above, I believe the creditor has the right to change your credit limit at will. If the creditor will not willingly increase your credit limit to its previous amount, your legal recourse is probably quite limited.
3) See above
4) Credit scoring is much too complicated for me to tell you how one single action will affect your credit score, especially without knowing more details about your overall financial situation. For example, I do not know how much you owe on this and other debts, what your credit limits are, etc. Paying off the account would likely improve your credit score, but simply closing it may or may not help. To read more about credit scoring, I encourage you to visit the Bills.com Credit Resources page at /credit/.
5) Generally speaking, if a consumer closes a credit account with an outstanding balance the creditor will accelerate the debt and demand full payment within a very short time period (like 30 days). I would be very surprised if the creditor allowed you to continue making your minimum payments if you closed the account.
6) I really do not think that threatening to file for bankruptcy protection is the best way to convince this creditor to increase your credit limit. You may wish to explain your positive payment history, your length of time as a customer of the bank, your good credit score, etc. I would recommend focusing on positive aspects of your financial history rather than the possibility of future financial difficulties.
7) Again, I would recommend discussing the positive aspects of your past credit performance when requesting a lower APR for the same reasons as listed above. If a creditor thinks that you are on the brink of financial collapse, it may lower your credit limits and increase your interest rates even more due to the additional risk you pose to your lenders.
You should remember that the reductions in credit limits and other lending by many banks is a response to our countryÂ’s overall economic problems. They are making such changes on many customersÂ’ accounts as a matter of policy; this is not happening as a result of something you did. Unfortunately, there is probably not much you can do to correct the problem either. If you need credit, you may wish to consider opening new credit card accounts to replace the credit lines reduced by your current creditors. However, given the difficult economic times we are facing, you should be very carful about overextending yourself financially. I wish you the best of luck finding a solution to your problem, and hope that the information I have provided helps you Find. Learn. Save.