Does lowering your credit limit lower your credit score?

Question

I already have several credit cards. I want to lower the limit on one (which I have used for several years) from 13000 to maybe 3000 or 4000. Also I want to cancel a credit card (2500 limit) which I have never used. Will doing either of these things lower my credit score?

I am planning on doing this because I want to get a different credit card for home improvements (lower interest), and I want to make sure that I wont be denied because I have to much credit for how much I make. Obviously, if my credit score goes down... that wont bode well for this endeavor either.

Thanks in advance (and please only answer if you know what you are talking about)

I only have about 500 on the 13000 credit card. I also have a 6500 credit card, but I can't cancel that one (even though I haven't used it) because it is a dental credit card.

My total available limit right now is around 20000. I certainly wont use it all... but we are fixing up our kitchen and want to get a specific credit card with no interest for a year. I don't make much money, but I wont be the only one paying this off, I just have the highest credit score (i believe its 765)

Answer 1

Lowering your credit limit and/or closing a card will have a negative impact on your scores.
The thinner your credit file, the more it will hurt. Since it sounds like you only have 3 cards, that would be considered a very thin file.

Plus when a credit limit is lowered, the other creditors will notice. There could be a strong possibilty that the other creditors will follow suit and lower the credit limits on those cards also.

I know many people who have credit limits that exceed their annual income by 2 or 3 times (and some have more)
In general they are not penalized by having that much credit since they take care of their accounts.

You didn't mention if the card you are thinking about is a store card or a major card. If you are planning on getting a store card from Home Depot or Lowes, go in person to apply.

I'm not sure about Lowes, and unlike many creditors, I know HD does have a say in the approvals when someone applys in store.
If HD is aware that you will be spending money in their store, that may sway them to make sure you are approved.

Answer 2

Hello there,

Lowering the limit on your credit card may actually reduce your credit score. One of the things that may impact your credit score is a high ratio of balance to credit limit, say $24K combined credit card debt out of $25K total limit...

Another thing that can impact your credit score is having too many accounts with a balance, which makes sense because you would have more bills to deal with and possibly a higher combined minimum monthly payment (most cards have a minimum payment no matter what your total balance is).

Bottom Line: No need to lower your credit card limit. If you wnat to cancel the other card without a balance, do it, but only if you have plenty of "available" credit. Just make sure your total balance is not a significant portion of your total credit line.

Hope this helps!