Ask Jean: Will Decreasing My Credit Limits Hurt My Credit Score?

If ask jean will decreasing is on your radar, this short guide cuts through the noise. Here is what is worth knowing, and how to put it to work today.

Key Takeaways

• A reader asks HerMoney CEO Jean Chatzky: "Will decreasing my credit limits hurt my credit score?" Q: I have a long credit history, many card...
• If I call and have some of the credit amounts decreased, what will happen?
• I want to open another card for a specific large purchase (and get travel points), but I imagine they may look at my available credit and th...

A reader asks HerMoney CEO Jean Chatzky: "Will decreasing my credit limits hurt my credit score?"

Q: I have a long credit history, numerous cards and lots of available credit. If I call and have some of the credit amounts decreased, what will happen? I want to open another card for a specific large purchase (and get travel points), but I imagine they may look at my available credit and think it’s too much.

A: What you’re suggesting can create a lot of unnecessary hassle - it might even hurt your credit score. That’s the word from Lisa Gill, a credit expert with Consumer Reports, who shared her insights on the potential pitfalls of reducing your credit just to qualify for a new card:

If you carry any debt, reducing the available credit on your cards could backfire. That’s because doing so will actually worsen your “debt-to-credit” ratio, the amount of credit you’re using compared to what’s available.

It works like this: Let’s say you have a $1,000 credit limit on a card, and you carry a balance of $300, which amounts to a 30% utilization, which is the sweet spot. If you called the card issuer, spent a half hour or so on the phone with customer service to reduce your credit limit to say, $600, now not only do you have a migraine from all the back-and-forth with the agent, but your new debt-to-credit ratio becomes 50% and your credit score is going to take a hit.

If you did this for all your cards, you might need a very long nap to recover from being on the phone so long - and you’ll almost certainly see a noticeable, double-digit drop in your credit score. Ouch.

Say you were to do all this, and after your nap, you go apply for the new travel card. The issuer pulls your credit info, and instead of that stellar score you had two days ago, now they see it’s dropped recently and that your debt-to-credit ratio has increased. All of a sudden, you aren’t looking like a excellent candidate to give more credit to.

My somewhat annoying, big-sisterly advice is to consider forgoing the new card and all the hassle that comes with it. Instead, figure out which of your existing cards already has travel partnerships that you can take advantage of with the massive amount of new points your big new purchase will provide.

If none of the cards in your wallet satisfy this itch, then consider picking a card that’s fully paid off and cancel it entirely. Then, if you’re sure your FICO score falls into the “very good” or “exceptional” standing, go ahead and apply for the new travel card.

Good luck and bon voyage!

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Final Thoughts

Before you check out, double-check ask jean will decreasing against current offers and any coupons you can stack. Small habits like this add up to real savings over a year.

Originally published at savingswitch.com.