Why Your Business Credit Card Limit Decreased

When resources are thin and unexpected expenses creep up, many companies reach to their company credit card.

Business credit cards can offer benefits, including higher limits and better rewards than personal cards. New business owners can also use business credit cards to help build their company credit reports.

There are credit card issuers who offer cards especially for those looking to build credit, business owners open the card by offering a personal guarantee but the payment information reports back to a business bureau. If used responsibly positive payment patterns will be reflected on the bureau’s credit report, reflecting positively on company credit.

** The bureaus do not share information. If the card you open only reports to Experian, the payment information will not reflect on the other business credit reports. **

Has this ever happened to you – Out of the blue your credit card provider cuts the revolving limit on your business card by 20, 30, or even 50%?

This change can be disastrous for companies and individuals who rely on their available credit to cover expenses while waiting for receivables and in times of financial hardship. When a creditor reduces a limit, it is usually a sign of credit issues on your business and/or personal credit reports.

As you know, when you are applying for credit the credit card companies will do a hard pull of your credit before authorizing the account. After approved, they will periodically do soft credit pulls to evaluate the account and your credit status. Even if you’re up to date on all your revolving bills, other negative information can reflect poorly to creditors.

For instance, some card issuers will look at your D&B Paydex score. If you are current on accounts but have had some late payments in the past which caused the Paydex to fall below a certain threshold, they may reduce your credit limit. Some providers will also reduce limits or close accounts due to inactivity and very high balances– which can hurt your credit.

If you get a notice that the limit on your credit card has been dropped or the account has been closed, it’s important to review all three business credit reports and the personal credit reports of the card guarantor. Usually a decrease in credit limit is a red flag and means that there are other underlying issues with the credit.

North Shore Advisory offers a Concierge Business Credit Building Program that is done in-house by our team of Credit Experts. We also offer a Business Credit Repair program for companies with established profiles who need damaging information removed. We will customize our services to fit the needs of your unique business. Reach out to us today for a free consultation.