Credit Card Articles > 5 Rules For Protecting Your Credit Limits
by: Janna Weiss
If you make a late payment on your credit card, take out a big loan, or bounce a check, don’t be surprised when your credit limit starts to shrink. Banks lost a lot of money during the mortgage crisis, and they’re looking for any excuse to minimize their risk of losing more money to bad credit card debt. The end result is stringent lending rules and plummeting credit limits.
Sometimes customers see their credit limits shrink for no apparent reason. Perhaps they simply work within a “risky” industry such as mortgage brokering or home construction, and credit profiling led to a reduction in credit. Then again, the lower credit limits could have been the result of their spending behaviors. If you want to keep your credit limits in good standing, read on for five valuable tips.
Rule #1: Don’t ignore notices from your creditors. You know those letters you receive in the mail and probably discard? They’re more important than ever right now. This is how your creditor will inform you of changes to your credit limit. If you ignore these notices, you might be in for an unpleasant surprise!
Rule #2: Don’t make late payments. Of course, none of us ever intends to be delinquent on our credit card debt, but sometimes life throws us challenges. Just remember that 35% of your credit score is determined by the timeliness of your payments. Consistent late or missed payments will lower your credit score - and your credit limits.
Rule #3: Don’t make minimum payments. This is tried and true advice, but it bears repeating. Minimum monthly payments are designed to keep you in debt for many years. Look at your credit cards as short-term loans with steep monthly interest charges. Repay as much as you can, as fast as you can. Too much outstanding debt results in lower credit limits.
Rule #4: Don’t be a habitual credit card applicant. Applying for multiple credit cards in a short period of time will raise a red flag in creditors’ minds. Three inquiries one month can lower your credit score. In fact, opening a credit card account to take advantage of an offer can reduce your score by 5 points or more. To protect your credit limits, stick with two or three credit cards you really need, and ignore the rest.
Rule #5: Don’t max out your credit cards. The goal is to keep as much available credit line as possible. Never exceed 50% of your credit limit on each card. 30% is even better. Credit bureaus are only interested in how much of your available credit you use; charge too much, and your credit score will suffer.
If your credit limits have dropped, do get in touch with your creditors. They might reconsider if you’ve been a good customer. If they won’t reach an agreement with you, it might be time to take your business elsewhere.
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