Letters: Should I lower my credit limit?

A U.S. Postal Service letter carrier prepares to place letters in a mailbox.

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.

About the author

David Lazarus is an American business and consumer columnist for the Los Angeles Times.
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I have been a Marketplace Money listener for years and as of today, that relationship has ended. I am HORRIFIED by the host's suggestion in the second half of this segment that the adult children of elderly parents should put a freeze on the parents' credit, without their permisson, and refuse to give them the password as a way of getting around the parent's reluctance to agree to a power of attorney! [ "Without having to go through all the rigamarole of a power of attorney" (his exact words)!]

Even if this were legal - and how can it be, to freeze the credit of another adult without their consent? - it certainly isn't moral. How would Mr. Lazarus react if he found out that his sister or brother or any other person took it upon themselves to freeze HIS credit without his permission and without legal authority to do so? If the person no longer has the mental capacity to manage their own finances, there are legal avenues to address this, such as court-ordered guardianship. Sneaking behind someone's back and freezing their credit without their consent is unforgivable.

I have found the advice on this show over the past several episodes to be of increasingly questionable value but now that it has crossed the line into questionable legality and ethics I will certainly stop listening altogether.

Thanks for taking the time to comment. We value any and all feedback from our listeners!

Elizabeth from Brookfield, her bank reduced the limit on her credit card to reflect her spending habits. Elsewhere she implied she does not use more than 30%? her limit.

Is this common? Is her bank telling her "use it or lose it"? Or was this a retaliation for having her card compromised?

Opting out does make sense, but know this: opting out also means that the bank will likely close the account.

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