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Q: Capital One lowered my credit limit for no reason! I always paid my bills off every month. I really need my limit raised because I make big purchases every month. What can I do?
A: Since the recession started, credit card companies have been lowering credit limits. When the economy was good, they gave out too much credit. Now that the economy is suffering, they are starting to worry that customers will not be able to pay and want to reduce their risks. There are two ways of dealing with tightened credit limits. Either you can get more credit, or you can reduce your need for it by paying down debts and finding ways to cut costs.
The first thing you can do is talk to the credit card company. Ask to speak to the manager. If you have been paying your payments on time and have been using less than half of your available credit, they may be willing to reason with you. Unfortunately, many customers have found that credit card companies are unwilling to budge on their decision to lower credit limits right now. If this is the case, you may have to apply for another card. Try to do so before the lowered credit limit hurts your credit score.
If you can’t get additional credit, you need to pay down your balance if you can, or it may hurt your credit score. Try to get it at or below 30% of your credit limit. Once it is, it should not negatively affect your credit score. If, on the other hand, you need credit just to get by, you need to cut costs immediately. For your personal budget, cut down on eating out, and cook dinner at home instead. Sell your car that carries a $10,000 loan and get a cheap, used car.
If you were using credit to finance your business, you also need to find creative ways to cut costs. Hire an intern instead of another paid employee. See if friends can help you with things for free that you used to outsource, and in return, you’ll watch their kids one night. You may need to operate at a smaller volume than you did before; for example, if you run a boutique, buy fewer clothes this season. Alternatively, if you have a reputation for paying on time, vendors may be willing to extend you extra credit, but keep in mind that they are struggling too.