It is possible that when reviewing your account statement you have perceived that your line of credit decreased, of course this makes you question the reason that the bank had to lower your line of credit. Are you the only person this happens to? No, these situations may arise. Let’s find out why it can happen.
What is a line of credit?
A concept that we must know as credit card users is: the line of credit, don’t worry, it is a simpler term than you think, however, it is important to be clear about what it refers to.
The line of credit is the amount of money that the banking institution grants to a person, in the case at hand, the amount available to use on your credit card. Let’s see an example, a bank offered you a credit card with a total credit limit of 1,500,000 million naira, your line of credit, therefore, is for that amount.
In the case of the credit card this amount of money is available and you can use it repeatedly, let’s go back to the previous case, your line of credit is 1,500,00 million naira, this month you used 300,000 thousand, it means that you have 1,200,000 available for continue with your purchases. If you decide to pay without generating interest the amount you used, 300 thousand naira, once you make your payment, you would again have 1,500,000 million naira at your disposal.
This is known as revolving credits, they are different from other types of credits in which you can only have the approved amount on one occasion.
The line of credit is then the amount of money that the bank lends you so that you are using it through your credit card.
Why did the bank lower my line of credit?
Many users receive invitations to increase the line of credit, however, others when reviewing their account statement may perceive that the line has decreased, what are the reasons for this to occur:
- If the banking institution perceives a behavior in the credit history, with the required authorization, in which it identifies that the user has many credit cards or there are signs of possible over-indebtedness , it may decide to reduce the line of credit.
- If the user requested a payment alternative, such as debt consolidation, a fixed payment plan or extension of the term, it is likely that considering that the ability to pay has decreased, consider remembering the amount available on your credit card. .
- Due to the pandemic, some entities decided to reduce credit lines, since users’ ability to pay may be lower and the chances of falling into over-indebtedness are greater.
What can I do if my credit limit has been lowered?
If you realized that the bank lowered your credit limit, there are some alternatives you can do: the first is to contact your bank directly and request information about this action.
Second, remember that there are actions in terms of payments and amount of loans that help improve your credit score, some of them are:
- Pay credit commitments on time.
- Do not request more credits.
- Cancel credit cards you don’t use.
- Fully cover the payments you have.
- Do not have credit cards to the limit.
In recent times, the main reason for reducing credit lines was caused by the crisis generated by the pandemic, this as a preventive measure against the over-indebtedness of users and that they could fall into delinquency. If you want to know if your line of credit will return to the amount you had, the best alternative is to contact your bank directly.