Closing credit cards/reducing credit limits - an opposite view

Clariman

Chrysalis wrote:

hmm whats callcredit?

A credit reference agency like Experian and Equifax

do they know what is deposited in people bank every month?

No. This information does not get reported to CRAs.

do the public have access to callcredit reports on themselves?

Yes, you have a statutory right to see any information that a CRA has about you and you can get it corrected if there are mistakes. For a complete list of how to get hold of your credit reference information from all the CRAs in various forms (free, statutory £2 report etc) see this table.

Clariman

Ali-OK

Chrysalis wrote:

do they know what is deposited in people bank every month?QUOTE]

Your overdraft will show up on your credit report, if you've got an account that was opened after credit reporting took off, which I'm told is early 1990s. (ie. My main current account opened in 1984 doesn't show up, but my newly opened current account does with overdraft limit and o/d balance).

Clariman

Good point Ali-OK, overdrafts will show.

Chrysalis

interesting, on my credit report no such info shows up but of course the credit report they let public see probably not version they see. But I only checked experian and not callcredit.

Is this even legal? I dont remember giving my bank permission to give my bank balance to 3rd parties.

YorkshireBoy

Chrysalis wrote:

...but of course the credit report they let public see probably not version they see.

You will see more information (about yourself) than other lenders can see. For example, other lenders cannot see that you have searched your own file. Nor can they see 'quotation' searches and other unrecorded (ID type) searches.

Is this even legal? I dont remember giving my bank permission to give my bank balance to 3rd parties.

Yes, it's legal - and you will have given permission when making your application (unless it's a very old account and you've not had your T&C's updated).

David333

Clariman wrote:

As you can see there is a conflict between having a lower amount of "available credit" and minimising the "percentage used of credit", but it is all a question of balance I think.

Clariman

I know it's not an exact science but do you think it'd be better to have £10,000 available credit and only £2000 used (using 20% of available credit), rather than £5000 available credit but using £2000 of it (using 40% of available credit)...?

Clariman

David333 wrote:

I know it's not an exact science but do you think it'd be better to have £10,000 available credit and only £2000 used (using 20% of available credit), rather than £5000 available credit but using £2000 of it (using 40% of available credit)...?

In my answer, I will express my opinion but it is no more than that. The opinion is based on reading what people have experienced on discussion board likes this, TMF and the stoozing website, combined with the sorts of answers that industry insiders have given (e.g. in the stoozing site's recent Experian Q&A). You should also be aware that each lender has their own credit scoring process and rules, so may assess your scenario differently. Also it will depend on other factors like whether the person is employed, earnings etc. Having give all those caveats, my opinion is ...

I think that the £2000 of used credit with £5000 available would be marginally better because the percentage utilisation of available credit is still low and the total available credit is also low. When looking at credit card utilisation, the lenders don't like to see someone maxed out in their usage which might suggest that they are struggling financially and, therefore, at more risk of defaulting. Having 40% used would not count as "maxed out" in my book.

Looking at it further (again this is "opinion") ... if someone was earning in excess of, say, £40,000 pa, then I think the £5K versus £10K available credit would be neither here nor there. Howeve, if their annual income was £14,000, then the advantage of only having £5K credit versus £10K might be more evident.

I hope that helps.

Clariman

Chrysalis

ok but why are people with no current credit deemed as such high risk?

YorkshireBoy

Chrysalis wrote:

ok but why are people with no current credit deemed as such high risk?

To put it bluntly, you're an 'unknown quantity'. You can't prove that you can manage credit.

Building a credit history can be a long drawn out business, sometimes taking several years to qualify for the better/best offers and high credit limits.

You can be on the electoral roll, have a landline telephone number, have a long employment record with your current employer, have a long banking relationship, and have lived at your current address for many years - but at the end of the day, your ability to prove you can manage/repay borrowings plays a very important part in a lenders decision to offer you credit.

It's a bit of a catch 22 situation, ie you can't get credit because you haven't had credit! That's why first time credit card applicants are generally advised to approach their own bank first, as they know how you handle your finances day-to-day.

This method is not without it's problems though, because a number of banks choose NOT to report positive account conduct to the CRA's. Instead, they'll only report negative information, ie late payments or defaults.

If your bank adopts the 'positive information' only approach, then this is where the 'credit-builder' cards come into their own. Yes they're high APR cards, but pay them off in full each month and you won't pay any interest.

More importantly, you'll hopefully start to assemble a stream of '0's on your credit history - making you more attractive to other card providers.

Chrysalis

but having a handful of credit cards with half used credit doesnt mean you can handle credit either. Their is some weird logic used by the credit card companies thats for sure.