Reducing Credit Limit on my Credit Card or close? - Good move?

Stubbsy055

I have 3 Credit Cards and want to apply for another in April and close 2.

Nationwide
Barclaycard
Capitalone

Now the barclaycard is coming out of its 0% deal in April. At this point I will want to apply for a new 0% card with another company to transfer the balance to it.

I am thinking of reducing my £5000 credit limit on my nationwide card to £250. Would this have a positive effect on my credit rating/success rate in getting a new card on a good deal? Or is it worth just paying off my balance of £150 and closing it?

Once barclaycard is transferred to new card, I will close that account.

Airwolf1

I had to reduce a balance on one of mine to get another, however, I'd just keep 2 if possible. 1 for balance transfers and one for regular use (paying off in full by d/d each time).

jonesMUFCforever

I agree with Airwolf1 - reduce the credit limit on the card you will not be using.

Stubbsy055

Thanks guys I'll get it reduced

Moggles_2

Obviously, we don't know your annual income, but I would think carefully before reducing the credit limit on your Nationwide card. Lowering limits leaves no record on your credit file of the former more generous one. Nor will your credit files show they were reduced at your request (as opposed to Nationwide's decision). Lowering credit limits can affect future applications for credit if you overdo it and £250 is drastic!

Bear in mind that potential lenders cannot assess the way you handle credit directly. The best indications they have are the payment history and credit limits on your existing cards with other lenders.

In addition to the number of accounts in use (our national average, btw, is five credit cards), lenders look at the extent their credit limits have been utilised. Maxed out accounts make you look desperate for credit, so it's wise to leave plenty of leeway.

Other things being equal, it's better (credit score-wise) to have fewer cards with higher limits, than a clutch of cards with lowish limits. So, if you want to reduce your available credit, it's better to pay off the balance and 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 decent-sized credit limit well

yollyp

For me, there's no need to lower your credit limit because it's only you who will use it anyway. So the burden of using the whole limit is up to you. Discipline is the key. If you think you can only afford 250 then by all means spend up to that limit only. Except of course if the cost of the card is basing on the credit limit allowed.

jonesMUFCforever

There are new rules in force now which lenders can actually see not only what you owe but your limits as well.
This is why I would recommend reducing the limit on unused cards or you may have a perfect credit limit but still be refused a new card because you are deemed to have too much 'available' credit.