"Available Credit" good or bad?

Money_Saving_Mark

I've read conflicting theories on whether or not having a lot of credit available (eg a credit card's credit limit) is a good thing or not.

Martin says on this site that canceling old cards is good for your credit rating (such as it exists), however, another site (I would post a link but apparently I'm not allowed!) says that canceling cards is bad for your credit because it lowers the amount of overall credit available to you.

The theory being that the ratio of credit in use and total available credit is the important thing, so having a larger available credit is better.

I guess the whole thing is pretty murky but does anyone have an idea on which is more accurate?

Moggles_2

There's no perfect answer that suits everyone - or even the same person at different times - because circumstances vary.

The national average is five, so if you have five credit cards or fewer and none is maxed out, it's unlikely your credit rating would be harmed by keeping these cards, unless you have a lower than average annual income. That said, with each successful credit card application, your available credit will increase in relation to your income and there will come a point when you must consider closure.

I think you have to treat each credit card on its own merits. IME, some card companies (eg. Barclaycard, Virgin) have regular, existing-customer offers and Virgin which belongs to the MBNA stable will even waive BT fees sometimes, if you're prepared to negotiate over the phone. At the other extreme, some lenders (eg. HBOS, HSBC) reserve their best deals for new applicants.

In general, unless a card has a particular benefit, then I would close the account. Firstly, having lots of credit, even if not used, may put off potential lenders and secondly, by cancelling a card you can re-apply to that provider as a 'new' customer and take advantage of any introductory deals on offer.

Another good reason for phoning customer services to cancel an unused card is that occasionally you're offered an incentive to stay

Money_Saving_Mark

OK, so is there are anything in this ratio of credit in use compared with credit available then?

clio

Is it possible in todays climate too get 100% + credit in relation too your salary. IE: credit card limit 20 thou - salary 20 thou.

Money_Saving_Mark

Is that a question?

HouseHuntr

clio wrote: »

Is it possible in todays climate too get 100% + credit in relation too your salary. IE: credit card limit 20 thou - salary 20 thou.

Not only is it possible, but it's not difficult to have combined credit limits far exceeding an annual salary, in some cases up to 4-5 times. Obviously only available to those with excellent ratings.
You'll find that regular 'professional' stoozers have at times had combined limts of maybe £100-£200K against salaries of £30-£60K.
The old addage of the more you have the more you can generate certainley applies.

HouseHuntr

Money_Saving_Mark wrote: »

I've read conflicting theories on whether or not having a lot of credit available (eg a credit card's credit limit) is a good thing or not.

Martin says on this site that canceling old cards is good for your credit rating (such as it exists), however, another site (I would post a link but apparently I'm not allowed!) says that canceling cards is bad for your credit because it lowers the amount of overall credit available to you.

The theory being that the ratio of credit in use and total available credit is the important thing, so having a larger available credit is better.

I guess the whole thing is pretty murky but does anyone have an idea on which is more accurate?

It's widely accepted by easily the majority that leaving unused cards open with available limits is not beneficial to your credit rating as it will greatly impact future applications for credit.

There's absolutely nothing wrong with posting genuine links, unless it's for :spam:ming purposes or failing that copy SOME (not all of the text) and also post the link.

clio

Mark
Yes - just a little one though:)

HH
Even in this credit crunch matey?? and being over your salary with credit limits would surely hinder future applications. Don't no if it would stop you getting a credit card limit increase as they may take your account conduct into consideration..

Moggles_2

Money_Saving_Mark wrote: »

So is there anything in this ratio of credit in use, compared with credit available then?

In addition to the number of accounts in use, lenders look at the extent their credit limits have been utilised. Maxed out accounts make you look stretched so, if you're going to apply for another credit card, it's wise to leave some headroom.

As noted above, your income is also a vital part of the equation.

HouseHuntr

Yes, even in todays climate ! Mine is currently 3.68 x Annual salary.

Why would being over your salary hinder future applications ? It's quite common.

Money_Saving_Mark

HouseHuntr wrote: »

It's widely accepted by easily the majority

This doesn't mean it's correct though!

HouseHuntr wrote: »

There's absolutely nothing wrong with posting genuine links, unless it's for :spam:ming purposes or failing that copy SOME (not all of the text) and also post the link.

Sorry I wasn't clear before, the forum wouldn't let me post it because I'm a 'new member'.

Trying again:

http://www.iwillteachyoutoberich.com/blog/60-second-video-myths-of-credit-2/