Lower credit limits for California residents?

Posted by Caitlin on September 21st, 2009

MSNBC reports that a San Diego resident was told that his credit limit was lowered simply because he lives in California. Paul Smith recieved a letter from issuing bank HSBC informing him that, based on information obtained from Equifax and due to the current economic environment, the credit limit for his General Motors credit card would be lowered from $7,000 to $1,400. Smith contacted Equifax and discovered that, because he carried a $1,400 balance before the credit limit had been lowered, he now owed more than 51% of the available credit on the card, which caused his credit score to drop. Smith's credit report also showed that he had never been late with a payment and had always paid more than the minimum required. So Paul called HSBC and spoke with a customer service representative who explained that his credit limit was cut due to the financial situation in California, and that similar measures were being taken in Nevada, Florida, and Arizona. When reached for comment, an HSBC spokesperson stated, "As standard business practice, HSBC's card business adjusts credit criteria based on economic, market and other factors."

Depending on your balance, lower credit limits can often lead to a lower credit score, since the percentage of available credit that is being used is one important factor in calculating your score. For this and many other reasons, it's a good idea to monitor your credit report for any significant changes. Keep in mind that it's best not to carry a balance greater than 50% of your available credit at any given time. Check out our reviews and comparison charts to learn more about credit cards and credit report monitoring.