Matt!

I am sorry to hear that this happened to you.

Mr. CC

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No worries… I find it somewhat laughable. Maybe they wanted to redistribute their risk tolerance to customers who actually used their credit card more than I did.

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Matt
Are you carrying any debt? Then your debt to available credit ratio just went up.Your Fico score may be affected.

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@ PennyScraper

Other than a low fixed rate mortgage, I’m debt free. Strange isn’t it?

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I can’t stop laughing about this because I too have been hit by Discover. My wife and I both have 800+ credit scores and the only debt we carry is our house and 1 car loan. We are never late on paying anything.

I use my Discover card between 4-7 times a year for large purchases and typically pay it off within a month or two. Discover just dropped our credit limit from $11,000 to $500. I said $500? seriously? Well I guess Discover is going to loose a perfect customer because a $500 credit line does nothing for me.

Maybe they aren’t making enough profit off of the people who pay on time and prefer to keep someone they can tack on late charges and high interest to.

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@ David,

Hopefully you didn’t use your Discover Card that often for business use, or using it solely for their cashback bonus program. If so, that’s got to hurt if you don’t have an alternate source of easily usable credit. Tough break man.

Even though I wrote this seven months ago, I’m still confused with their reasoning on reducing credit limits. However, a few things stand out to me now that the Wall Street panic is (probably?) over:

1) Reducing their risk of credit defaults due to the economy (job losses). Thought being that good credit clients could lose their jobs, rely upon their credit cards to live for a few months to run up a huge tab, then declare bankruptcy leaving them high & dry.

2) Reducing credit lines to lower their leverage, and appear like a more solid financial institution. For a while, companies that had over-leveraged themselves were seeing their stock sold off in ridiculous amounts, so perhaps they wanted to give the impression their financial situation had improving their on-the-book stats. Even the mighty industrial giant General Electric suffered because of their GE Capital division, so it was considered a big negative to have assets exposed to the credit bubble.

Then again, as you correctly stated, perhaps it’s simply better to focus capital on clients who provide a decent ROI. Late fees and higher interest rates are a big money maker for the major credit card companies as we all know.

Thanks for commenting. If they increase your limit in the future, be sure to let us know.

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I applied for a Discover student card and received it a month ago with a limit of 250 dollars. I know it is nothing, but I am hoping they will raise it soon. I usually pay bills on time. Btw, how long do you all think it will take for my credit to get to “good” range? And Matt sorry to hear that mate, at least its not as bad like in David’s case. Thanks all Peace

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Matt SF Reply:
September 24th, 2009 at 11:07 pm

No worries. I’m not sure why it was reduced, but I’m guessing it was because I rarely used it or it was the height of the credit crisis and banks were trying to reduce their risk.

I’m really not sure you can “get” a good credit score in a short amount of time. The credit building process, as I understand it, involves taking out X amount of credit over a period of years, and consistently repaying it on time, every time. Then you take out Y amount of credit, repay, etc.

So it’s really more of a marathon that takes years of diligent work to get to that magical 720 to 750 credit score range.

Thanks for commenting!

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Matt and David, after considering what Discover did to both of you, I am sure that officials at discover are out of their mind.

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