Keep or cancel unneeded credit cards??

Cubeguy3

In terms of personal credit rating is it better to keep a credit card account open or to cancel it?

Thanks

Clariman

I spoke to both Experian and an industry insider recently (to write an article for the stoozing website) and was told that it was better to close the cards because that reduced the amount of available credit you had. Having said that, keeping cards open with nil balances reduces your percentage utilisation of your available credit which is a good thing, but that seems to be outweighed by a high amount of available credit.

Clariman

Cubeguy3

Thanks I think that's pretty conclusive. Cancel it is then!!

loan8r

In my experence it is as Clariman has said the problem is too much "avaliable" credit, the last two cards I applied for came with lower £1300 and lower £450 limits,
I was very puzzled by this as I have a spotless credit record, the problem only came to light when I contacted the last CC company to ask why such a poor limit and was told "you have too much avaliable credit"
I am now busy clearing up my act and closing / lowering the credit limits on unused / seldom used cards before starting to apply again.

A word of caution in my experience the credit reference agencys are at the mercy of the CC companys for their information and can take a while to update their records so leave three months between fully closing a card and applying for a new one.

Cheers, Mark

YorkshireBoy

loan8r wrote:

A word of caution in my experience the credit reference agencys are at the mercy of the CC companys for their information and can take a while to update their records so leave three months between fully closing a card and applying for a new one.

Or alternatively, if your need is urgent, wait a month and either spend £2 to get your statutory report or sign up for a 30-day free trial to check it's been done.

[Deleted User]

Do new applications look at existing limits to judge the limit to give you? Given that they can't verify salary info, it seems to me that they must use your average limit as a guide as to what to give you (amongst other things of course). ie is there a risk that by lowering limits on seldom used cards you are lowering the new limits you might get?

YorkshireBoy

anactuary wrote:

Do new applications look at existing limits to judge the limit to give you? Given that they can't verify salary info, it seems to me that they must use your average limit as a guide as to what to give you (amongst other things of course). ie is there a risk that by lowering limits on seldom used cards you are lowering the new limits you might get?

If you can show that you have 'managed' high levels of available credit, then this gives the lender a 'nudge' as to the kind of limit you're expecting.

However, to fully answer your question you'd need to understand the algorithms that the lenders use when assessing your applications.

The issue of whether you're better off, for example, with 70% used/available on lower limit cards as opposed to 40% used/available on higher limit cards has been raised in https://www.stoozing.com/credscore.htm - an article written with help from Experian and a lending industry insider.