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Why You Need to Know Your Credit Limits

Why You Need to Know Your Credit Limits

Few things in life are as humiliating as having your  card declined in front of people who are important to you, or even strangers for that matter. Nowadays, though, you face more and more of a chance of your card getting declined because of a reduced credit limit. Creditors are becoming more incredulous of their customers’ ability to repay their debts, and, as a result, are reducing the limits of many cardholders. The creditors’ goal in doing so is to try to increase the chances that they will be repaid; the less you can borrow, the more likely you are to pay it back. However, you can combat this with a few simple strategies that we will detail in this post.

  • Keep track of your spending. When it comes to tracking yourself, you always want to be one step ahead of your creditor. They will be keeping track of your payment history, how much of your credit capacity you’re utilizing, and any abnormal spending behavior. You can keep track of these things yourself, though, so you can take care of any red flags before your limit gets slashed. Almost all issuers now offer online account management, which makes keeping track of your spending easier than ever.
  • Pay on time. When it comes to card payments, you don’t ever want to be fashionably late. Pay at least the minimum amount on the due date without fail. Late payments will appear on your credit report, even if you’re late by a single day. Late payments will also bring unwanted creditor attention to your account. Your interest rates will rise, fees will be assessed, and you risk a credit limit reduction.
  • Don’t get behind on your other bills. Your payment behavior on the card in question is important, but so is your payment history on all of your other accounts. How diligently you pay your car loan, mortgage, phone bill, utilities, etc. will impact your score, which your lender will periodically review when judging the appropriateness of your limit. Late payments or delinquency anywhere on your report will negatively impact your access to credit in the future.
  • Obey the golden rule. A good rule of thumb is, if you treat your creditors well with good behavior and responsibility, they will treat you well in return. You want to have as positive of a relationship with your lender as possible. Once you’ve had a card for many years and have used it responsibly, your lender will value you more as a customer.
  • Keep a back-up card. If the worst-case scenario does happen and one of your cards gets declined, make sure you always have a back-up card with a low balance on you to use as plan B. This will is especially helpful in emergency situations.

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