Q: I have an extensive credit history with multiple cards and a lot of available credit. If I request lower credit limits, what could happen? I'm looking to open another card for a significant purchase and earn travel points, but I worry that lenders might see my available credit as excessive.
A: Reducing your credit limits can lead to unnecessary complications and potentially harm your credit score. According to a credit professional, adjusting your credit may come with drawbacks when aiming to qualify for a new card.
If you have existing debt, decreasing your available credit can negatively affect your “debt-to-credit” ratio, which is the amount of credit you're using compared to your total credit limit.
Here’s how it works: If you have a $1,000 credit limit and a $300 balance, your utilization is 30%, which is ideal. But if you call your card issuer and lower your limit to $600, your utilization jumps to 50%. Now your credit score could take a hit, and you might feel frustrated after that long call.
Doing this across all your cards could lead to a significant drop in your credit score. That’s going to sting.
When you apply for that new travel card post-adjustment, the issuer checks your credit score and sees the recent decline. Instead of the impressive score you had before, they’re now looking at a less favorable ratio and performance.
As a friendly piece of advice, it might be wise to skip the new card and avoid the hassle. Instead, explore your current cards for any travel partnerships that could maximize the points from your upcoming purchase.
If none of your existing cards fit the bill, consider canceling a fully paid-off card. Then, if your FICO score is still in the “very good” or “exceptional” range, you can confidently apply for that travel card.
Wishing you safe travels!
