I have always liked credit cards since I was a 18 years old. I have never really abused them and have never been a big user of them. However, I have always liked having the convenience it provides and having them in case of emergencies.
My credit history is perfect, goes back over 20 years, and I have an above average FICO score. Recently, for no reason I am aware of, a few of my credit cards reduced my credit lines down to the balance I owe on them. I actually used these credit cards for my business that I run. I have plenty of credit but I don’t like how they possibly could affect my future credit profile.
Literally one day, I had a $30,000 credit line card with a $10,000 balance. This is about 33% of the credit limit used. They reduced my limit to the $10,000 mark. I haven’t made any late payments on this card nor any other cards that I carry. The interest rate on this card is 3.99% fixed for the life of the balance. As long as I don’t miss a payment it will stay that rate. So now on my credit profile, it will look like I maxed out that card since I am at 100% of the credit limit. I have heard of card companies raising interest rates on a card if you are late on other cards, but all my cards are paid early. I do online banking and have them paid usually the day after I get my statement. I also have automatic payments set up to pay the minimum in case I overlook a payment. That is my failsafe backup plan in case my memory betrays me.
My guess is that the housing bust has hurt the banks and they are looking to reduce any further losses in their credit card portfolios. My feeling is they did this across the board with people who carry a big balance. At first it really irritated me, but I realize this is just fall out from the recession we are experiencing. That is one heck of a way to tighten up credit.
This literally happened yesterday and I haven’t had a chance to call the credit card company American Express to find out why they did this. I don’t expect to get a satisfactory answer since the account representatives are not the credit managers who make policy. The credit card company is free to do whatever they want as far as credit lines and rates, as I am free to cancel them and use other credit card services. In the future, when I have them paid off I will no longer use their services for my business.
I have a FICO score over 700, but because of this recent change I am guessing it will lower my score. I get free FICO scores through one of my other credit cards, so when they update next month I will see if this has had an adverse effect. If it so happens that my scores have been impacted negatively, who knows I might need to start looking at debt consolidation measures that might help turn things around.