Credit Line Reduction On One of My Cards

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Thu, Apr 16 - 8:48 pm EDT | 5 years ago by
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1503393018_8d6973f8acI don’t use credit cards much. And when I do, I try to pay off what I put on them immediately. But that doesn’t mean I’m not going to get a smack down from the credit card issuer. In fact, my responsible credit card use is more likely to get me a smack down, since credit card issuers aren’t making much off of me.

Anyway, I was a little surprised when one of my credit cards (issued by GE Money Bank) cut my credit line. Especially since I was nowhere near the limit and paying off my charges every month. This is my cash back card. But then I did some digging. See, when we bought our Prius a couple of months ago, we did our financing through the dealer for the special rates. Well, turns out the dealer blasted our information to a bunch of different lenders. (Yes, yes — stupid to get financing through the dealer. But that’s over and done.)

We got our good rate, but that’s not all we got. We got a bunch of inquiries on our credit report. And, even though we ended up with Chase financing, one of the banks that came back with a quote was GE Money Bank. Now, I can’t prove this, but I’m betting that our credit card line decrease came in part because GE Money Bank saw that we were taking out a loan for a car. The other part might have been the 15 point drop in the credit score that we had in the aftermath of car shopping, switching our satellite provider (credit check) and the fiasco with my Bank of America credit card. I fully expect that in 30 more days most of the credit score drop will be recovered.

I’ve tried to reason with the issuer, but to no avail. I was just told — more than once — that certain factors make me a bigger risk. Whatever. Of course, now this is going to ding my credit score even further, since now I have less available credit. Blegh. The other issue is that maybe my other credit cards will cut my credit line as well. Or raise my interest rate. Those new Fed credit card rules can’t come into effect fast enough.

image source: JudeanPeoplesFront via Flickr

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  • http://www.getmoneyenergy.com MoneyEnergy

    That’s too bad… but assuming you’ve got your car now and mortgage probably, does a perfect credit score continue to make much of a difference? Not having bought a car or taken out a mortgage yet, I don’t know those particulars. I suppose they’ll check it if you want to refinance or if you decided you wanted a second car. It’s funny, Peter Schiff was complaining about the same thing last week, because he has no debt whatsoever and yet his FICO score is only 650 – I guess for that sad, ironic reason – he always pays his cards off in full.

  • Miranda Marquit

    Yeah, it’s not as big a deal now that I’ve got the car and mortgage. But we were hoping to refinance to a 15-year mortgage at a rate less than 5%. But it’s going to take a couple of months for us to get things back in train. Of course, by the time we get back to that point, the rates may not be so low…

  • http://www.offtheurbangrid.com Lindsay

    No one has putzed around with my limits, but I know I used to have a better FICO rating when I was in debt with a car loan and a couple of cards. Now that the only thing I’ve got is my mortgage, it’s lower. What a system. :P

    The whole credit card industry is such an evil institution. You have to play the game, or you can’t get a loan for a house or a car, but we’d probably all be better off if it didn’t exist.

  • Miranda Marquit

    No kidding. I agree with you completely, Lindsay. It’s all rigged to have us in debt so we have to keep paying the interest. And if you don’t play the game, you have a hard time getting things that you actually need — like a house and car.

  • Jim

    Not surprising that GE reduced your credit line given that the whole finance side of GE is trying to shrink and lower the company’s leverage to reduce risk. I primarily use the Amex Blue Cashback card, and payoff my balance religiously every month. They’ve pulled some shenanigans with some of their cardholders who they view as lower quality (after management brilliantly decided to expand into that market right before the credit crunch hit), but haven’t adjusted my credit limits yet. If there’s nothing holding you to GE, I’d vote with your feet and say good-bye GE.

  • http://www.blog.joetaxpayer.com JoeTaxpayer

    FICO is a big game. Get a 0% rate for a year to pay off 18% cards, your FICO may drop. Get a store card to grab 10% off all purchases that day, you got it, score drops. I watched my score bounce up and down, a 50 point swing that made no sense at all. It’s not an exact science.
    Joe

  • http://www.marketfolly.com Jay (market folly)

    Interesting to hear your first hand account of this, thanks for sharing! We’ve actually been seeing and talking to a lot of people about this issue as it has been sweeping the nation, affecting tons of card accounts.

    We actually postulated that such a reduction in available credit will obviously negatively affect your utilization ratio (which is a main component of FICO scores). Additionally, people have been seeing cards closed down altogether by lenders out of the blue. This negatively affects FICO’s as well due to the credit history portion of your score being so large. As such, we’ve wondered if all this possible negative scoring could shift a whole slew of consumers down from “fair” to “poor” credit. (Think of those teetering on the edge… something like this could knock them down into subprime, etc).

    At any rate, we’ve elaborated in detail on this issue here about how the american consumer has essentially been “downgraded” in their credit rating: http://www.marketfolly.com/2009/03/downgrading-american-consumers-credit.html

    ~Jay

  • Miranda Marquit

    Thanks Joe and Jay! I think you are both right that this whole thing is kind of a mess. The shameful thing is that many people who have behaved responsibly are being punished for decisions made by lenders to extend credit to just about anyone.

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  • Miranda Marquit

    Oh, I’m planning on canceling the card altogether — after we refinance in a couple of months.