Assigning Limits

• Credit card issuers use various means to determine how much of a credit limit they should give to card users, though they generally rely on two key factors: your credit score and your income, according to Credit Karma. When either your score or your income changes, your creditor may lower you limit. however, it may also lower your limit even if you experience no changes.
  
  

Notification

• Whenever you and your creditors enter into a credit agreement, such as a credit card agreement, your creditor has to notify you of the terms in writing. If the creditor changes any of those terms, it must also do so in writing. So, if your creditor lowers your credit limit, it doesn't need your permission to do so, but it has to tell you about it. Companies can do this through the mail or through email, if you've signed up for electronic notifications.
  
  

Impact

• While having your credit limit lowered by your credit card company isn't necessarily a bad thing, it can negatively impact your finances. Your credit score is partially based on the amount of available credit you currently use, or your credit utilization ratio. If, for example, you have a card with a $10,000 limit and carry a $2,000 balance, you're utilizing 20 percent of the card's credit. If you use more than about 25 percent of your available credit on any single card, according to Kiplinger, this will negatively affect your credit score.
  
  

Prevention

• Though having your credit lowered can negatively impact your credit score, you can take steps to ensure any potential lowering doesn't cause you harm. If your credit card issuer allows you to sign up for online notifications, for example, you should do this so you know as quickly as possible about any lowering. You can also make sure you pay off all your credit card balances by the end of each billing cycle, or at least keep balances to a minimum, preferably well below 25 percent to 30 percent of your current limit.