Consumer Credit Score Repair And Maintenance–Problems Consumers Face When Lenders Lower Credit Limits

Consumers who had been attempting to either repair their credit score or maintain a positive credit history are usually able to accomplish this feat by keeping their balances low, spending within their financial means, and properly using credit cards in a manner that allows them to make charges each month but promptly pay off the debts so as to avoid costs related to interest, which could be problematic for certain consumers if these interest rate charges get out of hand. Understandably, consumers who are trying to repair their credit score or maintain a positive credit history and rating, have had some problems though when it comes to lenders lowering credit limits.

An article on Bankrate.com made mention of this problem, which is being referred to as “chasing down the balance,” and essentially is a practice where credit card lenders are lowering a consumer’s credit limit to either their current balance or just above their balance, and this has been creating problems for both consumers attempting to repair a poor credit score or even individuals and a decent credit position who may want to maintain and improve their score further.

One of the reasons that this has been problematic for consumers is that it will lower a credit utilization ratio, which can be a step back for consumers attempting to repair their credit or maintain a positive credit history due to the fact that their credit rating will reflect that the available amount of credit they have is now smaller in relation to the amount of debt they carry. Consumers who may have access to a high line of credit but a low amount of debt is present in their life will obviously have a more positive FICO score, but when banks are seemingly reducing a consumer’s credit limit for little or no reason, this can be problematic particularly for consumers attempting to repair a bad credit score and are in the process of paying off various debts.

Consumers who want to increase a low credit score or simply improve on their current credit score will have to find a way to get out of debt so that they can begin the practice of buying on credit and promptly repaying these obligations, but when a consumer’s credit limit is lowered to the amount of debt they may carry on a card, this looks as if they have maxed out their credit limit for a particular line of credit, when they may have previously only had a small percentage of debt on a credit card in relation to the overall line of credit.

Yet, there seems to be little that consumers may be able to do if their lender implements this practice, but there are indications that it is not affecting a wide number of cardholders. However, this is obviously very frustrating for cardholders and for individuals who may be attempting to rebuild or maintain a positive score, but one of the ways to combat the negative effects that this decrease in their credit limit may have is to simply keep low balances on their credit cards. While decreases on multiple cards would still show at consumer may have less credit available, if credit card debts are not excessive, it could be less harmful to a credit score than if they had a high amount of debt was present coupled with a drop in their credit limit.