Does requesting to lower a CC limit affect your credit score

Discussion in 'Other Credit Card Programs' started by Mrlasssen, Nov 20, 2013.  |  Print Topic

  1. Mrlasssen

    Mrlasssen Silver Member

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    If you request a credit card limit to be lowered prior to applying for another credit card with the same bank, will that request affect your credit score? Is it a good idea to have your credit card limit lowered to improve your chance to be approved for a new credit card with the same bank?
     
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  2. Sammich

    Sammich Gold Member

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    In short, yes. A part of the credit score is calculated on the utilization ratio of your credit limit. That is, the amount of balance on your credit cards divided by your total available credit limit (for all lenders) times 100.

    eg. $300 balance on $1000 total credit limit of all lenders = 30% ratio.

    So depending on how much you have per month, lowering it might affect it in some way. Generally speaking, you'll want to keep that ratio low. Keep in mind that if you do decide to lower your credit card limit, it'll take a while for the bank to report it to the reporting agencies.

    Since you're applying a new credit card with the same bank, they already have an idea on how much you spend, your payment patterns, whether or not you pay on time etc. I wouldn't necessarily say that lowering your credit will increase the chances of getting a new card with the same bank. In fact, if you pay your balances on time and in full, your chances of getting a new card with the same lender will increase even if you don't do any credit limit decreases - just because they already have an idea on your spending etc.


    Each bank approves credit differently though, which bank is this? Other readers might have an idea on how they work.
     
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  3. iolaire
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    iolaire Gold Member

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    My wife does this regularly and never has a problem getting new cards. She hates to get a new card and see a $10k or $20k limit when she knows she will never put over $2k at a time on it. But keep in mind her utilization level will always be low because we don't carry balances, and if you look a the total credit she has across all cards and companies its still fairly high.
     
  4. flynow

    flynow Silver Member

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    You can go to Credit Karma site and read a lot about credit scores. Good Luck !
     
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  5. Sweet Willie
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    Sweet Willie Gold Member

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    very key to pay attention to if one doesn't have a large pool of credit
    Why not apply and then see what happens? If the bank has issues with your overall limits, they will likely approach you with something like "we want to approve you for the card, but we want to lower limit of Y card to $XXXXX" Should be a very easy conversation with them seeing as it is the same bank.
     
  6. brucewil

    brucewil Silver Member

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    +1
     
  7. Sammich

    Sammich Gold Member

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    on a side note if this is an AMEX charge card then no credit limit will be listed on your report.
     
  8. I am here now!

    I am here now! Active Member

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    So, about Amex charge cards, does it matter how much we spend every month? I mean, since there won't be a ratio of how much we spend compared to our credit limit, then it doesn't affect our credit score, right?
     
  9. Sammich

    Sammich Gold Member

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    Yes and No. Because it's not counted into the debt utilization ratio. AMEX reports your highest balance to date on the credit report, with no credit limit on it. They also report it as an "Open" credit instead of "Revolving". Although some credit issuers may include it as part of their approval process. (I've had banks ask me about my amex spending before...it was about 60K per month on reimbursable business transactions alone)
     
    Last edited: Nov 25, 2013
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  10. Christal

    Christal New Member

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    My first question is why would you need another credit card from the same bank? Would you not just be better off getting a higher credit limit if you are thinking of buying something that is beyond your present limit. Or maybr try getting a line of credit which should have a lower interest rate any how.

    If you are concerned about your credit score you can get it here http://onlinecreditscoreapplication.com and see if you can even get another card or line of credit.
     
  11. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    My first question is: are you affiliated with that site you have mentioned in each of your two posts (over the course of a month or so) on this site?

    To answer your question: there are lots of reasons for having more than one credit card from the same bank/issuer.
     
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  12. jbcarioca
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    jbcarioca Gold Member

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    There is some serious misinformation being promulgated here. The 'sell you a credit score for profit sites' all provide generic information that does not reflect any specific situation.

    1) Requesting a reduction in a credit line DOES NOT negatively affect a credit score in the algorithms currently in use for initial card approval by the four major US issuers for which I have factual data. I doubt that is does for any others either, but I do not know absolutely about those.
    2) Although imputed credit utilization is used in decisioning for all those issuers, for the most part it is used as a screening rather than scoring factor. Still, it is also present in some scores. However, voluntary line reduction is very, very unlikely to affect any score negatively because it proves active management of exposures. In a recent outlier analysis credit line reduction requests were such a positive factor that in one specific case, at least, a reported customer credit line decrease request actually produces a rise is credit score (the score in question is an internal score used for credit approval and is not the generic scores that one can buy from My Fico, Credit Karma or other vendors).
    3) All types of cards that operate without intended revolving purpose and have no formal preassigned credit limit ( generally 'charge cards', American Express traditional cards, Diners Club traditional cards, Visa Sgnature, MasterCard Word) report 'highest outstanding balance' rather than credit limit. There are many exceptions to that rule including different reporting conventions for Trans Union than for Experian and Equifax, as well as American Express revolving cards (normally, those that are on the Optima systems). Further there is no way to see transaction volume in a credit report except in those cases where 'highest outstanding balance' is reported. Thus many issuers will ask questions when a very high report is made for charge cards.
    4) Even when general credit cards are reported the outstanding balance sometimes is reported even though at cycle date all the balance has been paid in full. As a result there is nearly zero significance of credit bureau reported utilisation vales, and the resulting formulas are largely useless... Largely but not totally...
    Nearly all use of calculations of imputed utilisation only weight very high utilisation (say, >70%) for several accounts. In such situations imputed utilisation does work and is very negative, thus usually becoming a screening factor rather than a ranking factor. Credit scores are built from ranking factors. As a result requesting the reduction of a credit limit can only be a positive, unless the requestor has poor credit anyway, and people with poor credit rarely, if ever, request credit line reductions.

    I hope that helps clarify some of these issues. The major thing to remember is that credit score is only one factor involved in a decision, and the problems usually identified in these threads almost always come from screening factors rather than ranking factors. Thus, the problems are not normally ones of low credit score. Nobody wants to make major discussion of taht because the regulatory process is built around credit scores and, more importantly the 'reason codes' for disapproval emanate from the scoring process. Besides, the issuers and credit reporting agencies all make lots of money from selling consumers their own data, advancing the mystical single credit score. Even mortgage and car loan securitisation has quality tranches reported that way, which works fine at a gross level, and is random (stochastic) at an individual level.
     
  13. othermike27

    othermike27 Silver Member

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    Here's a radical thought: why not just call the bank and ask them?

    Tell them exactly what you have in mind and why (you do have a rationale beyond the signup bonus, right?). Asking may get you transferred to a "credit specialist" or some such person, who may be able/willing to give you specific guidance for your situation. I see no downside to this approach. On at least two occasions in the last year, I have called/messaged a bank to ask my naive question before applying for a new card, and I have received good info that is specific to my situation. I count that as way more valuable than all the well-meaning but anecdotal help you'll find here.

    Good luck.
     
  14. satman40

    satman40 Gold Member

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    Banks operate on a number mentality, if you get a no, ask why, otherwise forget it.

    I have been ask for more money down on a house, and even had the cash for the property in my account.

    Called the Manager over and we closed the next day. CC if you have the money in the bank, you have no problem.

    Find the right person, and always pay your bills.

    BS walks and Money talks.

    I was 72 the first time I checked my credit score.
     

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