Any point in lowering the credit limit?!

SecretSquirrel88

Hi,

We have a Barclaycard which is 19.90% APR and has a balance of £2974.50. The limit on the card is £3950 - would there be any advantages of lowering this to say £3000?

The reason I ask is because we do not spend on the card anymore, nor will we once the card is clear - the interest is just too high to even think about keeping it to spend on once the balance is nil.

Another reason being that we are looking at getting another 0% on balance transfers card for this balance leaving the barclaycard clear (we may keep the card open however, incase on future offers).

However - when we apply for a balance transfer card and they see that there is the limit of £3950 does this effect the outcome of their dissision?

Thank you
x

NickX

I wouldn't have thought that a Credit Limit decrease from £3950 to £3000 would provide you with much benefit.

Personally I would keep the higher Credit Limit because a reduction to £3000 is dangerously close to your current balance and one slip up and you will breach it. Whatsmore, other lenders will see a card that is nearly maxxed out rather than one that is clearly being used but not right to the limit.

Others may disagree but thats my thoughts on the matter.

exel1966

SecretSquirrel88 wrote: »

Hi,

We have a Barclaycard which is 19.90% APR and has a balance of £2974.50. The limit on the card is £3950 - would there be any advantages of lowering this to say £3000?

The reason I ask is because we do not spend on the card anymore, nor will we once the card is clear - the interest is just too high to even think about keeping it to spend on once the balance is nil.

Another reason being that we are looking at getting another 0% on balance transfers card for this balance leaving the barclaycard clear (we may keep the card open however, incase on future offers).

However - when we apply for a balance transfer card and they see that there is the limit of £3950 does this effect the outcome of their dissision?

Thank you
x

Generally, Yes your current available credit can/could effect the outcome of any future credit, particularly the credit limit you would receive from a new lender, however what is also important is your percentage of used credit to available credit so by lowering your limit you will increase that percentage which may not work in your favour.

For the relatively small limits applicable here, I'd be inclined to keep your current limit of £3950 and if you're seriously considering another card for a BT only then maybe use a little more of what you have available for xmas shopping before BT'ing or alternatively get a card with 0% BT's and purchases for the same duration and use it for your xmas shopping and the BT.

SecretSquirrel88

Thanks. The thing is this barclaycard is in OH name and he cannot get any more cards due to his credit rating, so I just wondered if lowering the credit limit would be beneficial to being accepted to another card. If I explain a little more this is what happened:

Original debt: (In OH name)

Barclaycard: £1000
Barclaycard 2: £4000
Barclays Loan: £6000

Now:

Barclaycard: closed
Barclaycard 2: £2974.50
Loan: £851.03 - finishes March 09

The other amounts in my signature are now in my name on 0% balance transfer cards, therefor not in his name anymore.

When we checked his credit rating before it was bad, would it be worth checking it now to see what the difference of me taking an amount for the debt into my name has done?

I think once the loan is finished and there is an extra £220 a month, then the credit card will get paid quicker but money is so tight at the moment its un-believe-a-bubble!!

Moggles_2

Obviously, I don't know his annual income, but I would think carefully before reducing a limit which is already modest. Lowering limits can affect future applications for credit, if you overdo it.

Be aware too, it isn't always possible to re-instate some of the old limit should you change your minds later.

SecretSquirrel88

income is £14k. The card will not be spent on again, unless they are doing 0% on purchases etc once the card is clear.

Ok,, well thank you all for your input. I dont think we will lower the limit as it probs won't do alot for him anyway. thanks again

Moggles_2

Originally Posted by SecretSquirrel88
When we checked his credit rating before, it was bad. Would it be worth checking it now to see what difference me taking an amount for the debt into my name has done?

Yes, definitely worthwhile, IMO.

For tips to improve his chances of credit card acceptance, have a look at the *Credit Rating: how it works and how to improve it guide*, especially Martin's *Manage and Improve your credit score* article

http://www.moneysavingexpert.com/banking/credit-rating-credit-score#improve

exel1966

SecretSquirrel88 wrote: »

When we checked his credit rating before it was bad, would it be worth checking it now to see what the difference of me taking an amount for the debt into my name has done?
quote]

Why was it bad ? Amount of debt or poor payment history/defaults ?

Assuming it was just the amount of debt then it may be worth another look at his report to check that all is primarily correct and to see if things have improved which they could have done.

SecretSquirrel88

exel1966 wrote: »

SecretSquirrel88 wrote: »

When we checked his credit rating before it was bad, would it be worth checking it now to see what the difference of me taking an amount for the debt into my name has done?
quote]

Why was it bad ? Amount of debt or poor payment history/defaults ?

Assuming it was just the amount of debt then it may be worth another look at his report to check that all is primarily correct and to see if things have improved which they could have done.

Well Im not not sure, it only gave a score I think. I know that he did used to miss payments on the 2 credit cards, but he hasnt done so within the last 6 months or so atleast

Moggles_2

SecretSquirrel88 wrote: »

Income is £14k. The card will not be spent on again, unless they are doing 0% on purchases etc once the card is clear. I don't think we will lower the limit as it probs won't do alot for him anyway.

In that case, I'm sure you've made the right decision. Bear in mind that potential lenders cannot assess the way you handle credit directly. The best indication they have is the payment history and credit limits on your existing cards with other lenders.

Other things being equal, it's better (credit score-wise) to have fewer cards with higher limits, than a clutch of cards with lower limits. So, if you ever want to reduce your available credit (as opposed to his), it's better to cancel a card completely, as Martin advises. Cards that are closed down and marked "settled" stay on your file for six years and indicate that you can handle a higher credit limit well

exel1966

OK, but DO NOT pay for the three digit score as it is pretty meaningless and you'll be wasting your money. Just get the report to check all is in order.
A poor payment history will have a detremental effect and lower the chances of a significant improvement in the short term, but lenders like to see trends so his recent payments history may be slightly beneficial to him..........but by how much ?