Here Are The Factors That Can Lead To Sudden Reduction In Your Credit Limit

Credit Card

A credit card provides one with the flexibility of managing expenses.

Credit Card

Unexpected cuts in credit limits can prevent one from making big-ticket purchases and also have an impact on overall credit score.

Factors

1. Inactive Card: If the credit card remains unused for a period of time, it may be considered useless by the issuer. Active credit cards are preferred by the banks.

2. Financial Instability

When there is economic uncertainty or financial crises, the credit card issuers reduce the credit limits to manage risk. 

3. Credit Usage

If there is a sudden increase in credit card usage, the card issuer could get suspicious. This can make the issuer cut down the credit limit.

4. High Credit Utilisation Ratio

If the credit utilisation ratio is high, it would mean that one is heavily relying on the credit which can affect the financial stability. Here, lenders may consider one as higher risk borrower.

5. Missed Or Late Payments

Paying the credit bills late can have a negative impact on credit score and also the relation with the card issuer.

What To Do If Limit Reduces

One should always look for the reasons as to why the credit limit reduces. In such cases, banks should be informed for the reason.

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