Lowering credit limit on new card can hurt scores


Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for

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Question Dear Opening Credits,
I recently opened a David’s Bridal card to pay for my bridesmaid dress, and was approved for a $1,500 credit limit. At first I dismissed it because I really was just going to use the card to pay for the dress, then leave the card in limbo till I was ready to buy my own wedding dress in a year or so. After talking it over with my fiancé, he told me that I should have asked for a lower credit limit because that $1,500 is going against my overall credit. Will it do any harm to ask the lender to decrease my limit? I am just concerned that in the near future when I want to apply for another credit line, this $1,500 with David’s Bridal will get in the way. Can you please shine some light on my situation? – Julie


Dear Julie,
Save your stress for your friend’s wedding day! It sounds like your primary concern is to ensure that your credit rating remains positive so you can qualify for credit products down the line. Great. The card you’ve just opened isn’t ruining anything and may, in fact, have pushed your scores up.

You see, what matters most for a credit score – including the two most common, the FICO and VantageScore – is the way you handle creditor payments. If you pay your bills on time, every time, and over a long stretch of time, your scores will rise. It indicates financial responsibility, which all lenders value. Conversely, if you miss due dates, experience charge-offs (when creditors write off delinquent accounts), have debts land and languish in collection agencies or file for bankruptcy, your credit scores will plummet.

The sooner you delete any balance on the card, the better. Maintaining low or no credit card balances is essential to a high score. That new David’s Bridal account may be increasing your debt-to-credit-limit ratio – also knowns as your credit utilization ratio – if your purchases come close to the charging limit. But once the balance is gone, the added charging right is lowering your credit utilization, which is good for your credit score. Lowering the credit limit on the card could actually damage your score as it would decrease your credit availability, both on this card and across any other cards you may have, so leave it where it is.

That doesn’t mean that you should hang on to a credit card that you don’t need or want. If you’d like to close the account once you delete the balance, you can. Just know that your scores may decrease if you owe money on any other cards (because your overall credit utilization will then increase with the loss of that $1,500 credit line), so pay those down first. Your scores will also reflect a minor decrease due to the hard inquiry that was generated when David’s Bridal checked your scores before it approved the card, but any ding will be temporary. Your scores will eventually revert back to where they should be as long as you keep adding excellent information to your credit reports. That means charging with any other cards you might have, but paying them in full and on time. If you have any installment loans, such as a car loan or student loans, just keep paying them on time, too. A steadily declining balance is positive for scoring purposes.

In the future, don’t open accounts without giving the offer considerable thought. I know it’s tempting to grab an amazing deal, such as 20 percent off the purchase (which can be a major discount on big-ticket items such as a bridesmaid dress or wedding gown), but step back and wait. Weigh all the pros and cons before saying “I do” to additional plastic. It will help you avoid going through the painful credit divorce process that can happen when you break up with an issuer.

See related: Credit utilization: How this key scoring factor works, Credit limit tricks: Keep a score high while still using your card

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Published: June 29, 2016

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Updated: 10-26-2016

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