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

Approximately 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 the utilization rate you have… 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.

Example..  If you have a $10,000 credit line and carry a balance of only $2,500 you have a credit utilization measure of 25%.  If your credit limit is then cut by your credit card issuer to $5,000 then you jump to a credit utilization measure of 50%… lowering 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 no impact to your score.

Welcome to the aftershock of the credit card reform act!

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.