Ask banks to reduce your credit limits

Contact your banks and ask credit limits to be reduced

If your credit risk rating is poor, and especially if it has taken a beating lately due to non-
payments or other problems, you can ask that your bank reduce the credit limits on your credit
cards, credit lines, and other debts. You should do this if:

1) You can pay off at least 50% of your debt loads as they are readjusted. For example, if you
have a credit limit of $5000 on your credit card and get it reduced to $2500, you should make
sure that you can leave a balance of $1250 or less. If you owe $4000 and have no way of
repaying it, getting your credit limit reduced can actually hurt you. On the other hand, if you
need to get a larger loan and can pay off your credit card in full and reduce your limit to $2500,
you may be able to improve your credit score in this way.

2) You have lots of credit. If you have several types of debts and credit accounts - lines of credit,
credit cards, store charge cards, a mortgage, a car loan, and a personal line of credit - you may be
close to overextending your credit, especially if each of these accounts is fairly large. You can’t
always close down your accounts - especially if you are still paying your debts off - but reducing
the limit may make you eligible for a loan should you need it.

3) You have some credit but you don’t want to close your accounts entirely because you have not
had credit for very long. Sometimes, if you have several types of credit, it is not wise to close
them, even if you can, since lenders like to see long-term relationships with lenders. Reducing
the limits can make monthly payments more affordable and can actually give you a bigger credit
boost than closing long-standing credit accounts.

4) You will not be taking out a loan very soon. In the short term, reducing your credit limits may
actually lower your credit rating because your balances will make up a larger portion of a smaller
credit, but in the long run smaller charge accounts will actually boost your credit score by
making repayment of loans easier and by making you further from overextending your credit.

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2007 Timothy Watson