Does a Lowered Card Limit Hurt my Credit Score?

[dualstow]

ChatGPT says yes, and gives reasons why. Is it right?

“
Yes, if a bank lowers your credit limit on a credit card, it can potentially affect your credit score. Your credit score is determined by various factors, and one of the key elements is your credit utilization ratio, which is the amount of credit you're currently using compared to the total credit available to you. It is typically expressed as a percentage.

When a bank lowers your credit limit, it reduces the total amount of credit available to you. If you continue to carry the same balance on your credit card(s), your credit utilization ratio will increase because the total credit available has decreased. A higher credit utilization ratio can negatively impact your credit score because it may suggest a higher risk to lenders.

Here's an example to illustrate the impact:

Let's say you have two credit cards with a combined credit limit of $10,000. You have a balance of $2,000, resulting in a credit utilization ratio of 20% ($2,000 / $10,000).

If one of your credit card issuers lowers your credit limit to $5,000, and you still have a $2,000 balance, your credit utilization ratio will jump to 40% ($2,000 / $5,000). This higher ratio could potentially lower your credit score.

It's essential to monitor your credit utilization ratio and make adjustments to your spending and payment habits accordingly, especially when your credit limit is reduced. Keeping your credit utilization ratio low, ideally below 30%, is generally considered favorable for your credit score.
/end quote

[whatchamacallit]

That makes sense to me.

Credit Karma does list the utilization rate as a top contributor to your credit score.

That response it had makes me wonder if it is plagiarizing that information. Something that may be needed for ChatGPT in the future is citations.

[dualstow]

Thanks!
And yes it is plagiarizing, pretty much.

[boglerdude]

Presumably everyone here pays off cards monthly. Lowering your overall available credit should only ding your score a few points. Citi lets you do online soft-pull CLIs every 6 months and in my experience increases each card by ~2k.

[dualstow]

Presumably everyone here pays off cards monthly. Lowering your overall available credit should only ding your score a few points. Citi lets you do online soft-pull CLIs every 6 months and in my experience increases each card by ~2k.

A few points - I can definitely live with that.