Closing credit cards/reducing credit limits - an opposite view

The_Boss

It shows you arent tempted to blow your entire limit on whatever you can - this shows discipline and that you manage having credit well.

Chrysalis

according to their system yes, but I dont beleive that to be the case with everyone, they trying to use a one rule fits all logic.

The_Boss

I've also been rejected for a GE card. I'm now not going to apply for any more cards until my credit limits have gone up on each of my cards.

The_Boss

Just to add - I was also rejected for a Capital One card in July and rejected for an increase on my MBNA card last week.

My failure streak is at 9 months now - one loan, 3 cards and a credit limit increase request. This is a big lesson to me and should be to others.

I've got something else to add to this now : I remember reading an article either on here or stoozing website about the ideal percentage to keep your balance below, as a percentage of used credit to credit limit. What was the recommended level? Below 50%?

Going through my cards and doing some maths, my average used credit is 81% of the credit limit. This is until payday, when I will be paid for the (massive) expenses that I have had to pay out which will bring the total down to the late 60%. I'm going to concentrate on clearing my Morgan Stanley and Halifax limits (they account for around 87% each) before anything else and then apply for limit increases with those two when the balance gets down to about 50%

UK007BullDog

This is very interesting!

We have a handful of cards as well with 2/3 not used at all or now being paid off and the last lot shifted to 0% 12 months cards to pay it all off (fatherinlaws hip replacement operation and new automatic gear car, daughters university fees & associated costs and 2 brotherinlaws hospital & funeral costs, we had to pay as it was expected of my husbands family as he is the most successful and the only one with a regular income while the others live in a 3rd world country without a social welfare system).

So my plan was to move one last sum from Amex to a new card as the amex 0% rate finished in October. Since a lot of cards are from lenders that are linked up with other lenders our "available market" to find a new card is very limited. So I wrote to all the cards we do not use to cancel the account. I cut up most of the cards already anyway as I dont want to use them. Then I read this thread and it does make sense. So to the other cards I wrote that I want to close the account, however if they are willing to give us a new 0% rate for 12 months we would stay. I am still waiting on their response. Maybe I should not close all of them as mentioned before the ratio would be high indebted. Because right now our available credit is around £60K with debts of £17K paid off by middle next year (unless the other side of the family will be very unlucky again and we have to "cough up" and cover the costs.

I will write in another thread the responses we have had from the credit cards regarding the cancelling. It is quite eye opening.

Moggles_2

Thanks for sharing your experiences with us, Boss, to help others.

Whilst it can be a good idea to close unused credit cards, lowering the limit on a card will seldom improve your credit score and sometimes has the opposite effect!

Closing a card leaves a record on your credit file which persists for 6 years and, providing the payment record is good, contributes positively to your credit score.

In contrast, a request for a lower credit limit, leaves no record of the higher one. Consequently, those searching your file, see a user who has borrowed the maximum allowed on a low-limit card! This may signal over-commitment.

The_Boss

Moggles wrote:

Thanks for sharing your experiences with us, Boss, to help others.

Whilst it can be a good idea to close unused credit cards, lowering the limit on a card will seldom improve your credit score and sometimes has the opposite effect!

Closing a card leaves a record on your credit file which persists for 6 years and, providing the payment record is good, contributes positively to your credit score.

In contrast, a request for a lower credit limit, leaves no record of the higher one. Consequently, those searching your file, see a user who has borrowed the maximum allowed on a low-limit card! This may signal over-commitment.

You've totally hit the nail on the head.

Reducing credit limits can be extremely BAD for your score. As can closing cards when you owe money on others.

UK007BullDog

Hey Boss,

But what if you want to rate tart further down the line? At some stage one has to start a cull of the cards to be able to get new better deals.

What are your thoughts on that?

Thanks!

The_Boss

Basically, by doing what I detailed in the first post, I thought I was doing what was best. Now I need new cards to rate tart but cant get them.

I wouldnt close ANY cards if it means your total used credit becomes more than an average of 60% of total credit. I know it needs a bit of maths, but its worth the calculation

jay78

The_Boss wrote:

closing cards when you owe money on others.

Why is this? I'm intending on doing this myself.