Tips on Dealing with Credit Rollbacks

This guest post is brought to you by Steve Sildon, Managing Editor for Steve contributes frequently to the personal finance blogosphere on a wide range of credit-related topics, including credit cards, rewards programs and debt consolidation.

For seemingly no reason at all, thousands of credit card holders have involuntarily had their credit limits slashed recently. Referred to as “credit rollbacks”, banks and card issuers are trying to minimize the risk of skyrocketing defaults on credit cards. By limiting or rolling back the amount of credit they provide, card issuers can cut the risk of defaults substantially.

Credit rollbacks have not only sharply reduced consumers’ access to credit but have inadvertently affected credit scores as well, increasing the so-called ‘credit utilization’ ratio that factors so heavily in computing credit scores. Credit utilization is the percentage of your credit limit that you’ve actually used. For example, a cardholder with a $2,500 credit limit and a $500 card balance would have a utilization ratio of 25% 20%.

But after getting a $2,500 credit limit slashed to just $1,000, the same cardholder would now have a credit utilization ratio of 50% on the same $500 card balance. To avoid a negative impact on your credit score, experts recommend that you keep your total credit utilization rate well below 30% overall as well as on each individual account.

Suffering from the negative impact on their credit scores from rollbacks, many consumers have been left scrambling to reduce or pay down their balances more quickly so they can rebuild their credit scores as fast as possible. With the current economic crisis and the rising surge of layoffs, however, this action may not be possible for everyone. For those affected by the credit rollbacks, what can you do as a cardholder to correct the situation?

Here are some tips to get you back on track when your limit has been lowered involuntarily by your card issuer:

1) Reach Out to Your Credit Card Company
If you have been notified recently that your credit limit has been reduced, you should first call your card issuer and inquire about why your limit has been rolled back. Do not just assume that everyone else experienced the same thing. Ask for the specific reason for the reduction. All credit card companies have an obligation to disclose this information to you.

If the company representative is not willing to discuss it or cannot provide you with any information, ask to speak with a supervisor. If it was slashed through no fault of your own, perhaps you can negotiate the reinstatement of your original credit line. You may get a “no” for an answer, but that’s the worst thing that can happen and you won’t know until you have asked.

If you find that the roll back was the result of something you’ve done yourself from making late payments or going over-the-limit on one of your credit cards, it might be difficult to negotiate a reinstatement of your credit line. Either way, remember to approach the lender with a positive attitude and not harsh criticism if you want a reasonable shot at getting your credit line restored.

2) Attack Your Balances Now
Despite the fact that your card limit has been reduced, maybe even significantly, this is a great time to get control of your debt and pay down your credit card balances as fast as possible. By aggressively repaying your credit card balances and driving your outstanding balances below 30% of your overall limit, you can bring up your credit score quickly. Maintaining a positive debt to credit limit ratio will ensure that you are taking care of your credit rating and will provide your credit card issuer ample justification to raise your limit once again.

3) Make More than the Minimum
Above all, you need to ensure you are doing everything you can to maintain your credit score. Paying down your revolving debt in a timely manner is one of the most important ways to maintain that good rating but it should also include payments that exceed the minimum amount.

Making only the minimum payment on a credit card balance is one of the surest ways to get into or stay knee deep in financial trouble. If you have a large balance and a high interest APR on your card, the effect of compounding interest month after month will make it very difficult to pay off those card balances in full.

4) Check into New Credit Cards (Cautiously)
There are some incredible resources available online to compare various credit cards. If you are unhappy with your current credit card and feel you could benefit from a better card, check around to see what you can find to meet your financial needs, whatever they might be. There are a lot of credit cards on the market today that offer cash back rewards and other benefits that may fit nicely into your lifestyle.

If you’ve had the same credit card for a long period of time, you may be missing out on benefits that your current company does not offer. Do not close out that old card account though. Experts advise against closing out your old credit card accounts hastily if you decide to apply for a new card because doing so can damage your credit score. Keep in mind also that your old card issuer reserves the right to close out inactive accounts at their discretion so pay attention to the notices you receive in the mail and check your credit report regularly.

If your credit limits have not yet been rolled back, you will need to keep up with your payments and check your credit report regularly for mistakes, even more so now than in the past. Maintaining a solid credit history and credit score has never been more important, but there are some new wrinkles to be aware of. Credit rollbacks are affecting a lot of customers the lenders have deemed risky but if you concentrate on keeping tabs on your debts and using your credit carefully, you should be able to maintain the benefits of having a card with a decent limit.

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created this website back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.


  1. @Mike D. – Thanks. Corrected.

  2. I think in your first example of credit utilization, you meant 20%.

  3. Jeff@StretchyDollar says

    This is a good article at a good time. Of course, if you’re paying your balances off every month it shouldn’t hurt too bad, but if you’re working on larger debt, this is a great place to start. I didn’t know that we should keep our utilization to about 30% percent – that’s good to know.