If you have a credit card, you may want to check your credit limit.
Financial experts say many companies are lowering customers' credit card limits and that could affect your credit score.
Some people may not even realize their credit limit has been reduced. Some banks or credit cards will give you a heads up while others don't.
So what is a credit limit? This is an amount that your bank or credit card company will allow you to spend every month.
But financial experts say companies are lowering credit limits because of the global pandemic.
Many people are in financial trouble. Some have lost their jobs and they're having a hard time paying their bills, so lowering a consumer's credit limit helps the company mitigate risk.
"What they're trying to do is, they're trying to limit their exposure," said Brian Gilder, a certified financial planner. "Let's say you have a $10,000 credit limit, and they're seeing someone spend $8,000-$9,000 a month, they're getting really close to their credit limit. So they want to make sure you have the ability to pay back that money every month. So if you have a $10,000 credit limit, your limit could be down to $5,000."
Some people may be saying they don't spend that much on my credit card anyway, but experts say a reduced credit limit could negatively impact credit score and it's all because of something called credit utilization.
If your credit card company lowers your credit limit to $5,000 and you spend about $2,500, you now have a credit utilization score of 50%, which could pose a problem and cause your credit score to drop. Experts say you want your utilization to be lower than 30%.
You can call your credit card company and ask them to raise your limit, which in turn lowers your credit utilization.
You can let them know you've been a good customer, you make payments on time.
But just because they raise your credit card limit doesn't mean you should go to the store and ball out. That'll defeat the purpose, and you'll end up back at square one.
Credit card companies lowering credit limits, which could cause score drop