Stand up for nonprofit news & help us reach our $150k stretch goal! GIVE NOW

Letters: Should I lower my credit limit?

Marketplace Contributor Mar 8, 2013
HTML EMBED:
COPY

Letters: Should I lower my credit limit?

Marketplace Contributor Mar 8, 2013
HTML EMBED:
COPY

L.A. Times consumer columnist David Lazarus tackles your questions this week.

Elizabeth from Brookfield, Vt., recently had her credit card compromised. She went through the drill, got a new card in short order, but then got a letter from the card issuer saying her credit limit is being lowered to reflect her spending. But might that impact her credit score?

Lazarus says Elizabeth deserves kudos for understanding the debt-to-credit ratio. In other words, how much you are actually borrowing versus how much you can borrow (i.e. how much credit you have). “The best rule of thumb here is, if you keep that ratio to around 30 percent, give or take, with plenty of head room, creditors [will be happy],” says Lazarus.

Lazarus says if her credit limit comes down, the amount of head room she will have above her borrowing will shrink. Thus, her debt-to-credit ratio will get bigger — and she will look like more of a risk to her creditors. He advises her to look into whether she can opt out of having her credit limit lowered, and maintain the higher credit limit.

For more advice — including how to deal with an elderly person’s big debt — click play on the audio player above.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.