Fix Bad Credit - Contact your banks and ask credit limits to be reduced
If your credit risk rating is poor, and especially if it’s taken a beating recently due to non-payments or some other problem, you can ask that your bank reduce the credit limits on your credit cards, credit lines, and other debts. You should do this if:
1) You have excessive credit. If you have several types of debts and credit accounts - credit cards, lines of credit, store charge cards, a car loan, a mortgage, and a personal line of credit - you may be close to overextending your credit, particularly if each of these accounts is fairly large. You can’t always close down your accounts - especially if you’re still paying your debts off - but reducing the limit may make you eligible for a loan should you need it.
2) You can pay off at least 50% of your debt loads as they are readjusted. For example, if you have a credit limit of $5,000 on your credit card and get it reduced to $2,500, you should make sure that you can leave a balance of $1,250 or less. If you owe $4,000 and have no way of repaying it, getting your credit limit reduced can actually hurt you. On the other hand, if you need to get a larger loan and can pay off your credit card in full and reduce your limit to $2,500, you may be able to improve your credit score.
3) You will not be taking out a loan in the near future. In the short term, reducing your credit limits may actually lower your credit rating because your balances will make up a larger portion of a smaller credit ceiling, but in the long run smaller charge accounts will actually boost your credit score by making repayment of loans easier and by lowering the risk of you overextending your credit.
4) You have some credit but you don’t want to close your accounts entirely because you haven’t had credit for very long. Sometimes, if you have several types of credit, it’s not advantageous for you to close them, even if you can, since lenders like to see long-term relationships with other lenders. However, often reducing the limits can make monthly payments more affordable and can actually give you a bigger credit boost than closing long-standing credit accounts.
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