Keep card to maintain score?

morgan80 · 21 October 2016 at 3:44PM

Hi,

I've got a good score on Experian and I think it's because I've been using credit cards for years but always paying off the balance every month. I now want to simplify things and get rid of the cards, but I'm wondering - could this actually hurt my credit rating over time? i.e. if the only credit I have left is my mortgage?

Thanks,

Rob

Candyapple · 21 October 2016 at 4:09PM

Yes. Far better to keep at least 2 credit cards (1 as a back up in case first one failed) and to pay for something you normally would i.e petrol, lunch etc on it and make sure you have your direct debit set up to take the full balance each month, that way it doesn't cost you anything and your good payment history is reported back to the CRA's.

Having no line of credit is the equivalent of lenders viewing you as an unknown because they can't see how you would manage credit.

Also, if in the future you needed to fund a large purchase (holiday, house maintenance etc) it will be handy to have a 0% purchases card and the only way to get those type of cards with a high limit is to have a solid credit history.

morgan80 · 21 October 2016 at 4:23PM

Thanks Candyapple. Makes sense and I'll probably keep a card or two then and continue to pay in full at the end of each month. One reason I thought about getting rid of them - we recently needed to arrange some additional borrowing on the mortgage and they reduced the amount we could borrow because of the "snapshot" they took of our card balance at the time, which was towards the end of the month so relatively high. I told them that we pay it off at the end of every month, and of course they could see that in our credit history, but they still deducted it (or some multiple of it) against the amount we could borrow! Frustrating - but then I guess if we had no card at all and therefore no credit history we might not have even got past the initial credit score!

So if we do keep a card "alive" purely for the purposes of maintaining credit history, does it matter if we only put a few hundred quid through the card each month, rather than £2-3k as we have been?

Ben8282 · 22 October 2016 at 8:28PM

morgan80 wrote: »

So if we do keep a card "alive" purely for the purposes of maintaining credit history, does it matter if we only put a few hundred quid through the card each month, rather than £2-3k as we have been?

Why reduce the spend? Continue as your are now, put max spend through the cards, pay by full balance dd and keep the money in your bank account for the full interest free period earning interest on it and keeping your current account balance nice and healthy.
In the event that you should wish to re-mortgage in the future and are concerned about the balances, simply reduce the credit card spending a couple of months before the mortgage application then wait until the new low balances are reflected on your credit report before making the mortgage application.

Keep card to maintain score?

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