Why did my credit limit decrease? (2024)

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

My credit limit is 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 mean higher credit scores.

Given that my credit limit had gone down 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.

• Why had my credit limit been reduced?
• Was it bad to keep my credit card utilization so low?
• 3 steps to take if your credit limit is lowered

Why had my credit limit been reduced?

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 card issuer decreased my credit limit.

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 the credit card agreement allows.

Low usage isn’t the only reason a lender could decrease your credit card limit. You might find yourself in a similar situation to mine if …

• You have missing or late payments.
• Your overall credit card utilization is high (the amount can vary but often above 30%).
• Your credit scores are now lower for other reasons.
• There have been large changes in your spending behavior recently.

One thing a card issuer 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. Issuers 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 bad 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 positive use of credit cards, no use isn’t necessarily responsible use — as it likely won’t register as financial activity and won’t be reported to the bureaus as an indication of how you use credit. And 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 the card issuer lowered my credit limit because I have a handful of other credit cards with high credit limits and my overall debt is very low.

But 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 lower 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, ask if it can increase your credit limit 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 increased limit 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 strategically for small purchases

My card issuer decreased my credit limit 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.

Next steps

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. Check your credit reports for errors. Then, if interested, call your credit card company and ask about steps you can take to increase it again.

Also, remember to keep up 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.