Credit card

Why did the bank lower my credit line?

It is possible that when reviewing your account statement you have noticed that your credit line decreased, of course this makes you wonder about the reason the bank had for lowering your credit line. Are you the only person that this happens to you? No, it is possible for these situations to happen. Let’s learn why it can happen.

What is a credit line?

A concept we should know as credit card users is: the credit line, don’t worry, it is a simpler term than you think, however, it is important to be clear about what it refers to.

The credit line is the amount of money that the banking institution grants to a person, in this case, the amount available to use on your credit card. Let’s see an example, a bank offered you a credit card with a total credit limit of $15,000, your credit line, therefore, is for that amount.

In the case of the credit card this amount of money is available and you can use it repeatedly, let’s go back to the previous case, your credit line is $15,000 thousand, this month you used $3,000 thousand, this means that you have $12,000 available to continue with your purchases. If you decide to pay without generating interest the amount you used, $3,000, once you make your payment, you would have $15,000 available again.

This is known as revolving credit, different from other types of credit in which you can only use the approved amount on one occasion.

The line of credit is then the amount of money that the bank lends you to use through your credit card.

Why did the bank lower my credit line?

Many users receive invitations to increase the credit line, however, others when reviewing their statement may perceive that the line decreased, what are the reasons for this to happen:

  • If the banking institution perceives a behavior in the credit history, with the required authorization, in which it identifies that the user has many credit cards or there are signs of possible over-indebtedness, it may decide to decrease the credit line.
  • If the user has requested a payment alternative, such as debt consolidation, a fixed payment plan, or a term extension, it is likely that when considering that the user’s ability to pay has diminished, he or she will consider recalling the amount available on his or her credit card.
  • Due to the pandemic, some institutions have decided to decrease credit lines, as the users’ ability to pay may be lower and the chances of falling into over-indebtedness may be higher.

If the institution considers that there are signs of possible over-indebtedness, it may decide to lower the credit line.

What can I do if my credit limit has been lowered?

If you realize that the bank has lowered your credit limit, there are a few alternatives you can take: the first is to contact your bank directly and request information about this action.

Second, remember that there are actions in terms of payments and amount of loans that help to improve your credit score, some of them are:

  • Pay your credit commitments on time.
  • Do not apply for more credit.
  • Cancel credit cards that you do not use.
  • Cover in full the payments you have.
  • Do not have your credit cards maxed out.

In recent times, the main reason for reducing credit lines was caused by the crisis generated by the pandemic, as a preventive measure against the over-indebtedness of users and the possibility that they could fall into default. If you want to know if your credit line will return to the amount you had, the best alternative is to contact your credit card’s bank directly.

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