Articles about Credit Cards

The Importance of Keeping Your Credit High

The rules of credit industry imply the better your credit history is the higher credit limit you are eligible for. In spite of their opportunities, consumers with good and excellent score are in the habit of hunting for higher credit limits. People name different reasons for wanting an extended credit limit, in many cases it is just a matter of prestige.

However, there are cardholders who ask their credit companies to lower their credit limit! Though having great spending limits at their disposal, they want to cut them due to reasons that are beyond most consumers' understanding. What makes a person ask to cut his/her $25K limit to only $2,500?

Every bank has customers with especially good credit profile. They are provided with exclusive points or cash back rewards programs, perks and huge credit limits, even though they have no actual need in them. So, some of those valued bank card possessors decide to cut off what is unnecessary, thinking that it will do them only good. Also, people often find a large credit limit to be an undesirable temptation to spend, so they are eager to get rid of it.

Disappointing as it may seem to these customers, lowering one's credit limit will damage them and their credit history just the very next month after the bank does it. First of all, the person's credit rating will drop because of reduced credit to debt ratio (just imagine your total available credit is $20,000 lower!). As a result, when you apply for credit of any type later, the lender will be surprised and puzzled by this record in your credit report. It is absolutely strange, from the creditor's point of view, to see that the applicant had previously initiated credit limit cut. For a bank it looks like an evidence of the person's inability to cope with credit, and your online application can even be denied.

It is also worth mentioning that the cardholder's request to lower his spending limit can seem strange for the current lender, as well. The bank can suppose that if you want to have fewer available funds, you must have lost your job or are suffering from an illness. You can also look like simply an unreliable credit user! As a result the bank can decide to increase you interest rate and fees or even close your account. As you see, people who ask to be deprived of privileges are considered to be of high credit risk and, consequently, of bad credit.

No doubt, the credit to debt ratio as well as credit card denials are represented in the credit report. So, initiating your limit to be cut can change your good or excellent credit to a much worse score.

If you still think that a high spending limit is an evil, be sure you are not forced to use the entire limit you have.

You can use only $2K from $20K available and keep your bank and yourself absolutely happy. Just learn to be reliable with your funds, make timely payments and be a wise spender, thus keeping your credit and prestige boost.

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