Credit companies are slashing limits for people across the country, and it is important to know why and what the ramifications can be.
If you have had a 30 day late (which many people do) any time in the last 7 years, credit card companies can see it on your credit report. They are being that picky today, as the banks are taking heavy losses on their credit card portfolios. If you have any sign of being a bad customer, you might be near the credit chopping block.
Another reason for slashed limits is inactivity. I think that one is a load of crap, but it is happening. Use your card every few months and pay it off in full to keep it on active status in the banks eyes.
So, lets say you already had your limit cut. What do you need to know?
Credit score calculations are very complex. One of the most important factors is your percent of open credit used. If you have a balance of $500 on a card with a $5000 limit, you are using 10% of available credit. No big deal, you are doing nothing that can hurt your score. If you limit is cut to $2000, you are all of a sudden using 25%. That will hurt your score.
If you do not know your score, you can get it for free at Credit Karma.
Have your credit limits been cut? Let us know in the comments. Remember that you can always call and ask them to restore your old limit. The worst thing that they will say is no.
