Before considering reducing the credit card limit, you should also be aware of the many factors that may impact your ability to improve your credit score. If you can reduce your overall debt then reducing your credit card limit could help with your score. Decisions such as this will be easier to make if you have a good budget that can help you plan for the future as you will be able to calculate whether you will need the extra credit facility or not.
When is it Good to Keep a High Credit Card Limit?
You should only keep your current credit card limit available for circumstances where you need something to fall back on. For example, an emergency such as a car accident or immediate hospital care is more important than your current credit score. If you aren’t using your credit cards and have no intention of doing so in the future, then having that extra credit available could discourage lenders. They know that giving you a loan when they know that the possibility of you getting beyond your means could easily happen should you call on the available credit.
How Does Reducing Your Credit Limit Help Your Credit Score?
By reducing the credit card limit you will be reducing the risk to lenders and improving your credit score. If possible you should always try to reduce high-interest credit such as credit cards with lower interest loans such as those that can be borrowed on the security of your house.
When you have many forms of credit and they all have limits that are more than you are currently borrowing then lenders will look at the total credit available and this can add up to a substantial amount which could lead to problems if used.
Close down the newest cards and keep those that you have had for a longer period of time as they will help with your credit history. Having a long-term relationship is a credit record that banks love to see. Reduce the overall total amount of credit available to improve your score.