This week we’re exploring why credit limits can be cut unexpectedly and what you can do about it.
If your lender suddenly slashes your credit limit, it can feel like a shock – especially if you’ve been managing your account responsibly. But it happens more often than you might think, and it can affect your credit score and future borrowing.
Lenders, including credit card providers and retailers offering store credit such as Next or Very, regularly review customers’ limits and adjust them based on their own affordability checks. Unfortunately, these changes can seem random, and sometimes limits are cut even when your financial situation hasn’t worsened.
This can hurt your credit score, because it can suddenly mean that you’re over or close to your credit limit. For example, if you owe £400 on a £2,000 limit, you’re only using 20% of your available credit. This is called your ‘credit utilisation’.
But if your limit drops to £600, your utilisation jumps to 67%, which credit scoring systems see as risky.
If your balance is over your new limit, it could even show as ‘maxed out’ on your credit report, which can drag your score down and make it harder to get new credit or refinance.
There are a few steps you can take if this happens to you. Firstly, you can try and pay down your balance quickly to improve your score. This may be easier said than done, but it’s something to think about if you have the means.
You should also check your other accounts. Lenders also look at your total utilisation across all cards and catalogues, so reducing balances elsewhere helps too.
If the lender has changed reduced your credit limit but your circumstances haven’t changed, it may be the case that the original limit was too high for you to manage. If you feel this is the case, you can make an affordability complaint, which means the lender has to review whether it was responsible to give you the higher limit in the first place. In some cases, people have successfully claimed back interest for unaffordable credit.
Credit limit cuts can feel frustrating and out of your control but taking steps to lower your balances and challenge irresponsible lending if needed can help you regain stability and protect your credit in the long run.
If you need help with budgeting or other financial concerns, you can contact charities like Citizens Advice. Homes Plus customers can also speak to our dedicated team, for confidential money advice. Please be aware that there is currently a waiting list for this support.