What are the most common causes of credit limit reduction?

Most people have a high credit limit on their credit card because they can provide a sense of security. Not surprisingly, the reduction of the credit limit is usually worrying and it could make the debtors think what they did wrong. In many cases, the answer is that the debtor is too close to his credit limit, has a lower credit rating than before, or had a change in the financial situation that fears the creditor. On the other hand, sometimes a reduction in the credit limit has nothing to do with the debtor and much in common with the creditor.

debtors who constantly carry a high balance on their credit card are often perceived as a risk to creditors. While some people believe that high -balance companies are supported by credit card companies for money that the company earns from interest rates, many companies are afraid that these debtors will not be able to repay the card. Debtors who seem to never pay balance, start missing them completely or eventually declarebankruptcy. Few creditors want to get the situation to this point so that they can initiate the credit limit to keep their risk low.

Even debtors who carry a low balance and constantly make their payments in time could be influenced by the reduction of the credit limit. This is because many credit card companies monitor the debtor's behavior towards other creditors. The final accounts that are delinquent with payments on other cards and the increase in debt can worry about creditors, even if they are directly affected by these changes.

In addition, the creditor can look at the other aspects of the debtor's life that will not appear immediately on the credit report. Recent reward reduction, participation in credit card hardship, market closure or other major financial crises can be worrying for creditors. We will not find out most of these questions until they affect the credit message but if so they can startJIT to reduce the credit limit.

Unfortunately, even those who have perfect credit and perfect treatment of their finances could be influenced by a sudden reduction in the credit limit. In times of financial crisis, such as a difficult economy, many creditors want to reduce their risk. They usually do this by trying to get their money back, reduce credit limits and raise interest rates. Although debtors who are considered to be the highest risks are usually the first to intervene, those who do not have a credit card or pay each month are also the main goal of reducing the credit limit because the company does not earn money. Those who maintain balance just below the recommended 50 percent of their limit will probably also be affected.