Does it hurt your credit rating when card co. cuts your credit line?

[Kat45]

I got a lovely letter from Bank of America today explaining how they are adjusting people's credit lines because some of them are not appropriate for the person. They said that my line is much higher than warranted considering my history with the card. Now, they are correct on that count--my credit line was ridiculously high--higher than my annual salary has been for a number of years (considering the low-paying jobs I get, when I do get a job at all). I also never charge more than I can pay off the next month, so I have not made use of that credit line.

Even though the stated reason for the cutting of my credit line seems factual, I have to wonder what their real reason is: What are they up to? What's in it for them? I also would like to know if the cutting of my credit line will affect my credit rating. Many folks on this forum are much more well versed in the financial industry than I. What say you?

[CreekDog]

to the extent that it changes your credit used to available credit ratio

if you have 50,000 in credit limits and your gas card lowers your limit from 1000 to 500, that would probably have little impact.

however, if your Visa is cut from 30,000 to 3,000, i imagine that would affect your score considerably.

[Catshrink]

1. I think nearly everyone is in the same boat.

People with credit scores way over 700 are having their rates jacks and limits lowered. What's going on makes no sense. But don't worry: Obama's gonna get tough with them. I hope he does and I hope it takes effect immediately before they have time to jack the rates and fees up more.

[Fresh_Start]

2. maybe

the key characteristic used in scoring is the ratio of revolving debt to revolving limit.
Typically high scoring individuals have very low utilization (10% or lower)

[county worker]

3. If they cut your credit line below what you owe and you can't pay it down to below the limit your

screwed!

[Hassin Bin Sober]

4. Sure it can hurt your score(s) .

Especially if you are carrying a balance more than 35% than the limit. My experience has been, while running "what if" scenarios for clients, that 35% seems to be the magic number when it comes to increasing scores.

As a mortgage lender, I sometimes work with credit report tools to try and improve scores to qualify a client. There may be other limit ratio levels involved (higher or lower) but 35% always seems to pop up.

From what you posted, I doubt YOU will have a problem.

[walkaway]

5. I got the same letter today

I have no idea what my old limit was but now it's 20,000. That seems like a lot of money to me. I still don't know why they did it since all my bills are current and fine. I think it's their new plan for us all.

[notesdev]

6. You shouldn't have credit cards anyway

They are a sucker's game. If you have to borrow to fund your lifestyle, then you live too richly for your means.

[Kat45]

7. That's not what I do. I only buy what I can pay off that month.

I just don't like to carry a lot of cash with me.

[notesdev]

8. That's what debit cards are for

I recommend ING Direct Electric Orange - http://ingdirect.com - 4% interest earned on deposits, NO fees, NO minimum balance. I haven't seen any other bank offer anything even close to that - you're lucky to get half a percent in most places.

[question everything]

14. But with debit cards you may run into overdraft fees

Many businesses will "lock" a higher amount of your funds than you actually charge - for a period. And if you do have overdraft protection and you continue using your debit, the bank will charge a fee for each transaction.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=39961

[CoffeeCat]

9. I agree with you...why play this crazy game?

Why buy things that you don't have the money for?

Use a debit card if you don't want to carry cash.

I don't understand why people play with this fire. Even if you "pay it off monthly", you still
have to send in a payment every month, and hope it gets there on time to avoid a $75 fee. Why
play around and gamble with your money like that?

This is not a game to these companies. They will take your money, one way or another.

I can't imagine being in a business relationship like that...these companies are predators.

No thanks.

[Kat45]

10. What about online purchases?

That's one of the main things I use a credit card for.

[CoffeeCat]

11. I use my debit card to make online purchases...

I also book hotels, make airline reservations and anything else you can do with a credit card.

The only restriction I've found, so far, is car rental. So, we use my husband's AmEx business card for that.

[Kat45]

12. I'd be nervous to use my debit card that way.

I feel that every time I use it, I'm risking giving access to my bank account, with no redress if unauthorized money gets taken from it. Even when I use it in stores, I only do it when the pin number is used; I won't use the option that uses it like a credit card.

[eridani]

13. Isn't identity theft more of a problem with debit cards for that reason?

[Raineyb]

15. That's what online bill pay is for.

And I pay mine off weekly. The week's expenses goes on, the weeks expenses gets paid the day before payday and the 1-5% I get on purchases goes into my savings when I put in for the check. I wouldn't use a debit card for expenses they can clean you out if someone gets a hold of it. Credit cards have a $50 liability limit.

Regards

[Kat45]

16. What is "online bill pay"? n/t