Reduction of credit limit without warning

MichMoor

Hi All,

My brother in law has a credit card with the TSB with 2k on it, it did have a limit of 10k, however he just got a letter saying they were reducing his credit limit to 2k. They have a good credit record however they were 2 weeks late in making last months payment, forgot.

Questin is:
Is this the reason why they have reduced his credit and;
Can they do this?

Is there any way the decision can be reversed and would it affect if he applied for another card.

Thanks

YorkshireBoy

MichMoor wrote: »

...they were 2 weeks late in making last months payment, forgot.

Suggest to him that he pays by DD in future if he's prone to forgetfulness.

Is this the reason why they have reduced his credit and;
Can they do this?

Almost certainly, and yes of course they can!

Is there any way the decision can be reversed

Maybe, if he appeals in writing asking that an underwriter looks at it.

and would it affect if he applied for another card.

Lenders are reporting credit limits month on month now, so yes the reduction may be shown on his credit report. However, there's no way for a potential lender to know 'who' reduced the limit. However, if accompanied by a late payment marker (which is enough damage in itself) for that month an underwriter may put two and two together!

paulmcerlean

This is exactly why they have reduced it. And had he a balance of £500 it would have been dropped to that figure. Miss a payment or be late in paying and the bank becomes worried and reduces their exposure.

It is likely he will have a late payment marker on his credit file which will affect his chances of obtaining say a prime card.

As for can they do this - yes, of course. It is their money after all and if they sense an increased risk they will protect themselves.

The limit should increase again in future with payments made on time.

izools

Yes they can do this, and it is likely that the late payment is the reason.

10K is a well above average credit limit and reserved for all but the highest earners and most financially apt.

2K is more average and better suited to customers that may occasionally miss a payment / pay late.

If he goes 6/12 months without being late again they can review his account and increase the limit in line with affordability.

It would in all probability bode well for a new credit card application as having less exposure to unused credit elsewhere reduces risk in the eyes of a new creditor.

chattychappy

MichMoor wrote: »

Questin is:
Is this the reason why they have reduced his credit and;
Can they do this?

Is there any way the decision can be reversed and would it affect if he applied for another card.

Could be coincidence, but it does seem likely. It might have triggered a review - perhaps looking at other accounts and they decided to reduce their exposure.

Yes they can do it - even if the account was paid on time. They can even decide to close the account for their own commercial reasons which could have nothing to do with credit risk.

It is worth calling them, but there is no "right" of appeal as such. (Though you can insist that automated decisions are reviewed manually, that doesn't mean you'll get a result.) He shouldn't expect too much though - he might be told very little.

As to whether it affects other applications depends on whether it was reported. A search of the CRAs would reveal this. Most cards report monthly - so if the card was overdue at the time of reporting, then it would have an impact. A single missed payment does soon fade into insignificance if everything else is in order - but we live in nervous times, so yep it probably will make a difference. Also with a lower credit limit, if your brother-in-law is now using most or nearly all of his available credit, then he could look distressed. Different lenders have different criteria.

Any minute now, the "should have signed a DD" squad will arrive! Let's see who's first..

YorkshireBoy

chattychappy wrote: »

Any minute now, the "should have signed a DD" squad will arrive! Let's see who's first..

Already suggested as an option to consider (in post #2).

Your views are well known, but even you must admit that this is a prime example of where it would have worked? Unless of course they 'forgot' to have funds in the current account...in which case there's no hope!

chattychappy

YorkshireBoy wrote: »

Already suggested as an option to consider (in post #2).

Your views are well known, but even you must admit that this is a prime example of where it would have worked? Unless of course they 'forgot' to have funds in the current account...in which case there's no hope!

Yep, I was sipping tea whilst composing my post so you overtook me.

And, yes, I admit it!:D