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Ask Creditnet: Should I Cut My Credit Limit?

Dear Creditnet: My wife and I have excellent credit scores, but we used to only have one no annual fee credit card with a limit of $10,000 (balance is paid off each month). I recently opened another credit card with better rewards and it has a $20,000 credit limit.

I've been told not to close out our first credit card account, but should I lower the credit limit on it to somewhere around $500 since we won't be using it? Or will our credit scores be negatively affected by lowering our available credit limit from $30,000 to $20,500?

Answer: Thanks for your question, and congratulations on upgrading to a better rewards credit card! Even though you don't plan on using the old credit card much anymore, it would be best for your FICO scores to leave the account open with the same $10,000 credit limit.

Don't ask for it to be reduced at all. In fact, I recommend keeping the card active by using it from time to time for something like gas or groceries, and of course continuing to pay it off in full and on time each month. This will limit the risk of having the card closed or the credit limit cut due to inactivity or late payments.

Since you don't have a lot of credit cards in the first place, it's really important that your credit scores continue to benefit from this card as it has a high limit with no balance, positive payment history, and may even be the oldest account in your credit profile. All three of these factors play significant roles in the FICO credit-scoring model and shouldn't be ignored.

It sounds like you're already doing a great job at never carrying a balance on your credit card, so keep it up. As you continue to build positive payment history, keeping your credit utilization ratio low, and increasing the average length of your credit accounts, your already excellent credit scores might even get better.

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Joshua Heckathorn's picture

Joshua Heckathorn is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past twenty years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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