Lowering your credit card limit can have a negative impact on your credit score. A large portion of your score is comprised of your credit utilization percentage. This is the ratio of debt you are carrying compared to the amount of credit you have available. If you lower the limit, the percentage is going to increase.
As an example, let's say you have three credit cards, each with a $2,000 credit limit. You have spent $500 on each card. $1,500 out of the total $6,000 available means that you have a credit utilization of 25%. If you lower the limit on each card to $500, you end up using $1,500 out of a possible $4,500. That makes your credit utilization 33%.
Yes, decreasing your credit limit will definitely hurt your credit score because your credit card utilization determines 30% of your score. So if you decrease your limit and your balance is not below 20% of your limit, you're bound to witness a severe drop in your credit scores.
Focus on just using the amount of credit you need and not what you have. The lower your balance and the higher your limit, the better scores you will have.
Let me know if this makes sense.
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Your personal details (name, email address and phone number) will be delivered to the company advertised on the Creditmagic after ve agreed to go for the counseling session by filling out the no-obligation form. However, it is your discretion to accept or reject their services.
Not all the creditors/debt collectors agree to trim down the outstanding balances, interests, and fees payable by the consumer.
Consumers working with the debt relief companies can still be sued by the creditors/collection agencies.
Debt relief services may have a diminishing effect on the creditworthiness of the consumer. The total outstanding balance may increase as the additional fees get accrued.
The overall amount saved by the consumer through the debt relief services is considered as taxable income by the IRS.