Credit card limit dropped by card issuer to £500, will this affect my credit rating?

nikki_pip

Last week I paid of my outstanding balanace on my Halifax credit card. 

I was notified yesterday they have lowered my balance available to £500 from £5500!!

Can they do this and will this affect my credit rating. 

I have never missed a payment and paid over minimum amount each month. 

I am trying to build my my credit rating 
Thanks 

[Deleted User]

Yes, they can do it.

You have no credit rating - just credit files. Lenders will see the lower limit.  However they interpret it depends on their criteria and your wide situation.

If you have a number of other cards, it won't have an significant impact.  If not, you might want to get another card or three.

Make sure you clear in full each month - paying 'over the minimum' is not a great look unless it's on a 0% promo.

[Deleted User]

If you are not spending more than £500 a month and aren't paying back the balance in full every month, it could be a reason to drop your limit 

cymruchris

Just to agree with zx81 - yes they can do it - and it's happening to quite a number of people recently. I think most card providers are taking a closer look at their customers than usual to reduce risk and exposure to potential future bad debt. (That's not saying I think you're a bad risk- but you'll be falling into one of their algorithms due to your current outstanding balances - repayment histories - spending patterns or something or other)

In itself a single reduction won't really be an issue - do you have a range of cards carrying balances? Are you also making just above the minimum payments on those? If you're looking at improving your credit history - you'll need to work on getting the balances down a bit faster than just over minimum payment. 

funkycredit

Strange, I've a hell of a lot of available credit and never had any limits reduced. Only upwards - even now; pandemic or not. 

Must be more to it than that? Surely....

[Deleted User]

funkycredit said:

Strange, I've a hell of a lot of available credit and never had any limits reduced. Only upwards - even now; pandemic or not. 

Must be more to it than that? Surely....

There are tonnes of posts on this forum about it

dr_adidas01

funkycredit said:

Strange, I've a hell of a lot of available credit and never had any limits reduced. Only upwards - even now; pandemic or not. 

Must be more to it than that? Surely....

Perhaps there is but there have been a lot of threads recently where people have had their limits slashed by huge amounts, Aqua, Marbles and some newday card holders and have their limits reduced. Not to mention Barclaycard as they have been in the news lately for slashing customers limits to.

Perhaps you have been lucky in it not happening to you yet!!

pbartlett

https://forums.moneysavingexpert.com/discussion/6208450/barclaycard-abruptly-large-credit-limit-decrease-affect-on-credit-file

sonofmerton

a friend of mine online recently paid off their two credit cards. total balance 8k. this amount was most of what they had saved during lock down and not much more than they have in their account.  both cards now reduced to just 250 and 500 after previously being 9k and 10.5k. as a result my friend has little money on both counts.

it is hardly encouraging people to pay off credit cards if you use cash to pay it all off and then the credit card companies drastically reduce the limit. my friend certainly didn't want to get on the credit card merry go round again, but as a result of this they are now using the local food bank.

i told them not to pay both off and that should be the advice. never pay all your credit cards off at once. the way the world is you could end up with no money on both counts and having to use 'other lenders' just to make ends meet.  

i would have paid off one and kept the rest of the cash in the bank.

[Deleted User]

sonofmerton said:

a friend of mine online recently paid off their two credit cards. total balance 8k. this amount was most of what they had saved during lock down and not much more than they have in their account.  both cards now reduced to just 250 and 500 after previously being 9k and 10.5k. as a result my friend has little money on both counts.

it is hardly encouraging people to pay off credit cards if you use cash to pay it all off and then the credit card companies drastically reduce the limit. my friend certainly didn't want to get on the credit card merry go round again, but as a result of this they are now using the local food bank.

i told them not to pay both off and that should be the advice. never pay all your credit cards off at once. the way the world is you could end up with no money on both counts and having to use 'other lenders' just to make ends meet.  

i would have paid off one and kept the rest of the cash in the bank.

So you recommend to your friends that they pay loads of interest unnecessarily - some friend lol
If people have a huge balance which they are struggling to pay off and paying loads of interest on, frankly the bank is doing them a favour lowering the limit to stop them running debts up. I think your friend not having money is more to do with the thousands of pounds of interest paid, how is lowering his limit making him eat at a foodbank? You mean he can't run up a huge debt again living on the never never? 

Fidelia

I had massive debts for years but am now debt-free.  My credit availability was zero during the debt-paying years as I was on a DMP and all the credit cards were cancelled.  A lot of my money troubles arose through my misuse of credit cards.  I only have myself to blame but I am still angry that whenever I was maxed-out on my cards the lenders upped my credit limit without my even asking.  Absolute folly where weak-willed spenders are concerned.  However, that's in the past.

Once debt-free I was eager  to improve my credit score but with no credit history showing on my file my score was poor.  I took the advice of people on MSE to obtain credit cards, spend small amounts and always pay in full to avoid interest.  I have 3 cards now, all with lowish limits (£5,750 in total over3 cards) and none ever carry a balance at the end of the month.  My credit score has gone up because, presumably, I'm showing I can manage credit and my finances reliably.  Two  of these cards  have recently  lowered my credit limit and told me it's because I am not spending much on the cards!  They don't think I NEED the credit available. I'm desperate not to get into debt again and only use them for what essentials I would buy anyway, basically instead of using my debit card, and always paying off in full at the month end.

My credit score is now rated 'excellent' over all the CRAs so I'm wondering whether I'd be better ditching these cards now (which are for people with poor/no history) and go for a card from one of the major lenders.  Any advice?  If I do, would it be better to cancel the existing cards beforehand.  Would it look 'fishy' cancelling cards? It might appear the lenders had cancelled them and not me