What to do when your credit limit is lowered

Young man in red and black plaid shirt, sitting at a park bench, looking sadly at his phone.Image: Young man in red and black plaid shirt, sitting at a park bench, looking sadly at his phone.

In a Nutshell

Sometimes a credit card company can lower your credit limit, even if you’ve been using your card responsibly. If this happens, your credit scores may take a hit, but there are ways to mitigate the damage and get to the bottom of what’s going on.
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At a glance: 3 steps to take if your credit limit is lowered

  1. Call your credit card company and ask for an explanation
  2. Check your credit scores and credit reports
  3. Use your card responsibly for small purchases

Recently, I received a letter from Capital One alerting me that my card’s credit limit had been lowered from $15,000 to $10,000. My first reaction was, “But I have good credit!”

In my experience, there has always been a relationship between my credit scores and the credit limit on my credit card.

My credit limit is the total amount I’m allowed to spend on my credit card. It’s also a factor in determining my credit card utilization, which refers to how much of my available credit I’m using at a given time.

Most experts recommend keeping your credit card utilization below 30%. Lower credit utilization rates can suggest to creditors that you can use credit responsibly, so a low credit utilization rate may be correlated with higher credit scores.

Since my credit limit had been lowered and I had an existing balance on my credit card, I knew that my credit card utilization would be higher — and that this would likely have a negative impact on my credit scores.

Confused about credit? Learn about credit score factors.

This was particularly frustrating because I’d never come close to maxing out my card. The $15,000 credit limit worked in my favor because it helped keep my overall credit utilization down, and now I felt like I was being punished for doing all the right things.

In my case, “low usage” triggered the decrease

My letter from Capital One was titled “Important Change to Your Account” and read: “We noticed that you have not been using a significant portion of the credit line on your account,” adding, “to better fit your usage, we have changed your credit limit from $15,000 to $10,000.”

Despite the fact that I had been a customer for almost a decade, never missed a payment and have excellent credit, my credit limit was still lowered.

As I later learned, these things don’t necessarily matter. A bank or credit card issuer can generally lower (or increase) your credit limit at any time as long as it’s allowed in the credit card agreement.

One thing they can’t do is lower your credit limit and then immediately slap you with an over-the-limit fee or penalty rate if you happen to exceed the new lower limit. They must give you at least 45 days from receiving notice of the lower limit to charge you any such fees.

If you have any questions about how your particular credit card issuer handles credit limits, brush up on your card’s terms and conditions. Your issuer’s exact rights to change your credit limit are typically outlined in the fine print.

Was it a mistake to keep my credit card utilization so low?

I admit it: I hardly touched that credit card in the past five years.

It doesn’t have an annual fee, so I kept it open to maintain my 10% overall credit utilization rate.

I also refused to close my card because I’ve had the account open for almost a decade. Closing the card would likely negatively affect the length of my credit history — another factor used to determine my credit scores.

I called Capital One’s customer service to get more information and the rep confirmed it was due to the “low usage” credit line.

In hindsight, I probably shouldn’t have neglected my credit card so much these past five years. There’s a balance between low utilization and no utilization, and credit card companies may not look favorably on the latter.

While credit-scoring models often favor responsible use of credit cards, no use isn’t necessarily responsible use. If you never use a card, you may risk getting your credit limit lowered or having the account closed, which could have a negative impact on your credit.

3 steps to take if your credit limit is lowered

In my case, it wasn’t a huge deal that my credit limit was lowered because I have a handful of other credit cards with high credit limits and my overall debt is very low.

However, not everyone is in this boat.

If you’re struggling with credit card debt, try to avoid maxing out your credit card — ideally you won’t even get near the credit limit. Instead, consider paying off the card as quickly as possible so that you can lower your credit utilization.

Here are some steps you can take if your credit limit has dropped.

1. Call your credit card company and ask for an explanation

Call your credit card issuer’s customer service department and ask why your credit limit was decreased. Then, politely ask if they can increase it to the original credit limit amount.

In my case, I was told that I would need to apply for a larger line of credit if I wanted it back up to the original limit of $15,000. The customer service rep assured me that this request would result in a soft credit inquiry and could be done completely online.

2. Check your credit scores and credit reports

A credit score drop can result from a number of events, including a hard inquiry, a derogatory mark or a missed payment. Credit card utilization is one piece of the puzzle, but it’s by no means the whole puzzle.

Keep that in mind when you check your credit scores for any changes. You’ll also want to check your credit reports to make sure they’re error-free, as they contain key details on your credit accounts.

Each year, you can receive three free credit reports — one from each of the three major consumer credit bureaus (Equifax, Experian and TransUnion) from AnnualCreditReport.com.

Of course, you can always check your VantageScore 3.0 credit scores from TransUnion and Equifax for free on Credit Karma.

3. Use your card responsibly for small purchases

My credit limit was lowered because I simply wasn’t using the card, so I linked it to a few recurring subscriptions (Audible and Netflix) to make sure the account stays active. You don’t want to run the risk of having your credit limit lowered or account closed if it’s going to negatively affect your credit.

Even though those subscriptions only charge a small amount each month, my rationale is that it’s better to have some activity than none at all.

I also added the card to my Apple Wallet so that I can occasionally use it for other purchases. The plan is to pay it all off each month on time and in full, so that I don’t accrue any interest or rack up unnecessary debt.

Bottom line

Getting your credit limit lowered is something that may be out of your control, but if it happens, take the right steps and be vigilant about checking your credit.

Make sure nothing out of the ordinary has happened to your finances that might have caused the drop in your credit limit, and check your credit reports for errors. Then, call your credit card company and ask about steps you can take to increase it again.

Consider applying for a higher limit and remember to keep up the good credit habits, such as paying your bills on time and taking steps to pay off your existing debts. You probably won’t see the results you want overnight, but you may qualify for a higher credit limit in the future.

About the author: Claire Tak has a background in editorial content marketing and strategy and writes about credit cards, paying off debt and saving money. She’s obsessed with travel and audiobooks. Read more.