September 6, 2010

Credit Card Limit Reduced? What Happens To Your FICO Score?

About 1/3 of your FICO score is based on how much of your available credit you are using. This is called your "credit utilization".

The higher your utilization rate… the lower your credit score. The credit scoring models view this as you getting closer to maxing out your credit lines and becoming a higher risk.

If your credit limit is cut by your credit card issuer and has caused your credit utilization measure to drop, it subsequently lowers your credit score without you doing anything on your part.

If, however, your credit card company reduces your credit line on a credit card that you do not carry a balance on… then there is virtually no impact to your score.

Have you had credit lines decreased through no fault of your own? Let us hear about it. Click the comment link below and sound off. Your email address is NEVER published on this site, even though it is required (to prevent spam bots from posting here) to post your comment. We'd love to hear from you about this credit card limit lowering situation.

Tags: credit cards, credit utilization, debt, fico scores

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