UK Consumers Suffering from Lower Limits

Credit card companies began to lower the limits on their card holder’s accounts without any provocation from the card holder. In fact many suffering from the credit limit reduction were on top of their payments by paying down the card or paying it off. The credit card companies stated that these individuals were a higher risk and therefore they needed to offer a lower limit. While this has caused a stir among card holders who were subjected to these lowered limits, more than just the limit was affected.

In fact the credit card holders who have had their limits slashed are seeing an adverse effect on their credit scores. So not only are the card holder’s getting slammed on one side with the account, they are getting slammed on another side as well.

The credit limit reduction is seen as a negative to the credit card holder by the credit reporting agencies. As a result, even if the card is in good standing the account holder will see a reduction on the score. This reduction can be 10 points or 50 depending on the credit card company, the lowered limit, and the credit reporting agency.

With a lower credit rating the effects spread further. For individuals who are in the process of trying to get a new loan, a new car, or any other financial support in the way of credit, the lower scores could affect the new loan. In fact it could lead to a complete denial of the credit line they are attempting.

For consumers who have credit cards they need to be aware of the adverse effects happening in the recent months. These effects are caused by the credit crunch, and lenders need to find a change. The lenders such as banks and credit card companies are floundering right now as they lose more and more money on defaulted lines of credit. For those in good standing they are being punished, it would seem, for others mistakes.

It is an impossible situation because the consumer can’t just close the card. If the consumers try to close the card, whether it has a balance or not, they are going to be dinged more points. It is a no win situation. The points taken for a closed card are usually 10 to 20 points. If that is added to the 10 or more points already taken because of the lower credit limit, this could render any line of credit unattainable for the next six months.

Everything a consumer does to try and get credit or a new product is going to lower the credit scores. The consumer may decide not to close the card they have, but open a new one. This will also affect the credit scores in a negative way.

The only thing the consumer can do is use the credit card in a wise fashion to build up their points again. In this case they need to purchase something on the card and pay the balance off in full each month.

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UK Consumers Suffering from Lower Limits