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Bank lowered credit line for good reasons

I have several credit card accounts. My credit is outstanding: I always promptly pay all minimum balances and pay absolutely no interest on any of my cards. For a few years, I have had an account with one particular bank. Recently I paid it off, after which the bank quite unexpectedly lowered my credit line drastically.

It sent me a letter explaining why this was done, and though I obtained a credit report and disputed all four reasons, it will not budge. Even the banking authority that oversees this bank does not seem to want to delve into this matter.

This bank's action makes no sense: My other credit card accounts are all making offers to increase my lines of credit. H.D.

Response: We think we can explain the rationale behind the bank's decision. We did not contact the bank and can therefore not address the four reasons directly _ lack of recent retail account information, length of time accounts have been established, proportion of balances to credit limits on revolving accounts, and payments due on accounts. Keep in mind that what you received is a form letter, and the reasons given do not necessarily reflect your exact situation.

However, your credit report reveals a lot of information that would raise red flags for most creditors. (Given the financial nature of your complaint, we are printing your initials only.)

First, while we don't know your exact financial situation, your outstanding credit card debt as reported on the Dec. 10 copy of your credit report was $32,921. Your line of credit on your six open credit cards was $56,100. That's a lot of actual and potential debt and would give many creditors pause.

But here's an additional reason. Most of your existing accounts were opened within the preceding year. Shortly after opening them, you closed accounts on which you had, at one point, owed substantial sums of money: $14,000, $14,926, $8,544, $4,000 and so on.

You mentioned in your letter to Action that you were paying the minimum amounts on your accounts and yet were not paying any interest. We suspect the bank that drastically lowered your credit limit concluded from your credit report that you were transferring balances from one credit card to another. You know the offers: "Use the enclosed check to pay off existing balances/loans at a low, or even zero, interest rate."

This can be an easy way to get low-interest loans. The problem is that this house of cards can come crashing down.

At some point, you probably will no longer receive such offers. You may end up paying high interest rates on the existing loans. Many of these low-interest offers are for a limited time, after which the interest rates shoot up on the remaining balance.

Consider also that your debt load is not going down if all you are paying is the minimum. What would happen if your financial circumstances changed? If you continue to pay only the minimum amount due, it could take decades _ literally _ to pay off this debt.

It's clear the bank in question has been watching your account. You noted it had requested your credit report 10 times last year. Your debt load and your pattern of opening and closing accounts was likely making it nervous. To protect itself, it lowered your credit line. The most you owed on this account, before paying it off, was $7,173. Should you run into hard times, a bank might think that there's a big difference between charging off $7,000 vs. $500.

Ultimately, it is the bank's decision whether to raise or lower your credit line, and unless you can prove that it has discriminated against you on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance, there is not much, if anything, you can do.

Action solves problems and gets answers for you. If you have a question, or your own attempts to resolve a consumer complaint have failed, write Times Action, P.O. Box 1121, St. Petersburg, FL 33731, e-mail, or call your Action number, (727) 893-8171, or, outside of Pinellas, toll-free 1-800-333-7505, ext. 8171, to leave a recorded request.

We will not be responsible for personal documents, so please send only photocopies. If your complaint concerns merchandise ordered by mail, we need copies of both sides of your canceled check.

We may require additional information or prefer to reply by mail; therefore, readers must provide a full mailing address, including ZIP code. Names of letter writers will not be omitted except in unusual circumstances. Letters may be edited for length and clarity.