Sometimes when you have a problem, the best way to eliminated is to do just that, eliminate it. But if your problem is you use too much of your credit limit every month and have a hard time paying it back, eliminating your credit isn’t the best option.
If you ask your bank to lower your credit limit thinking that it will be a good deterrent from going buck wild with that magic free-money card, just take a step back and think about the consequences that action might have on your credit.
Thirty percent of your credit score is based on what’s called your credit utilization ratio. Basically what that means is it compares how much money you owe against the total amount of credit you have. If you were to ask the credit card company to lower your credit limit, this might help you curb your spending sprees, but it also hurts your credit score by showing that you don’t have as much credit available to your name.
So instead of taking drastic measures to reduce your credit spending, try a little internal restraint. Before you purchase something, ask if yourself if you need it, or want it. If you’re not sure, don’t buy it, come back in a week and think about it again. Nine times out of 10 you’ll realize it was an item you probably didn’t really need, have to, or even have the means to purchase.
If you really can’t resist, impose your own credit limit. You’re real limit might be $1,500, but tell yourself to cap it at $450. Lock the credit card in a drawer for the rest of the billing period and then take it back out after you’ve paid the balance in full. This will not only help you curb your spending, but it will also keep your credit usage at about 30 percent, which is ideal for helping your credit score.
