Closing credit cards/reducing credit limits - an opposite view

The_Boss

The mortgage was a new first time application for myself to move in with my girlfriend, but they couldnt give us the amount we wanted in both names. I'm therefore still living with my parents.

All my accounts show perfect history, including old mobile phone accounts. I've never missed a payment or gone over limit.

My current cards are NatWest : £3400, Halifax £2250 (slight increase by them), Morgan Stanley £2000, MBNA £3000.

Clariman

Not being a homeowner would count against you in general credit scoring terms. Are you on the electoral role at your parents' address? I still think that closing cards won't be the problem - I think it is probably other factors. Why you managed to get cards before but not now I am not sure. Has anything else changed?

It seems that you were OK up until the point when you applied for the mortgage. That may be a coincidence. However, I would start thinking around that area. Having applied for a joint mortgage, are your credit files now linked ? If they are linked and her credit history isn't as good as yours, it is conceivable that may have reduced your score.

I am just thinking out loud and trying to give you some ideas. There is no need to answer my questions on the board.

Clariman

The_Boss

Sure thing - been on the electoral role here since 1996 and our credit files are not linked, but its food for thought about the mortgage. That drops off in less than a month so I shall maybe apply for something in mid to late October and see where we go from there.

There's been pretty much no change in anything except reduction in credit limits and closing credit cards.

Moggles_2

Personally, I believe the reduction in the credit limits of the Morgan Stanley card to £2000 (down from £5500), the bmi MBNA to £2000 (down from £6K) and the Capital One to £1000 (down from £8K) were significant. These three cards had the highest credit limits originally and the result was a clutch of cards all with lowish limits. This was particularly unfortunate in the case of the Morgan Stanley card, IMO, which had been held since 2001.

Remember a request for a lower credit limit, leaves no record on file of the higher one. Those subsequently searching the credit report, see a longstanding customer with a low-limit card. Lenders know their competitors routinely raise credit limits over time, providing the customer keeps to their Ts & Cs. A low limit on a card held for some years could indicate a high risk customer. Worse still, if the card's in use, the customer appears to have maxed out on a low-limit card. This may signal over-commitment.

All too often, we see people posting their intention to lower a credit limit. If this thread causes them to think again, something positive will have come from this bad experience. To my mind, there's no advantage to reducing available credit in this way. IMO, it's safer to cancel a card outright, than voluntarily reduce the limit.

The_Boss

Thats it - I do believe a long history with large credit limits is worth more than the same history with lower limits.

I'm going to do balance transfers from my MBNA onto my Halifax and NatWest card, suck up the 2% fee for the Halifax and see if that stings MBNA into doing anything.

mountainofdebt

Have been interested in this thread - especially as we've been reducing our limits becasue I thought it would be better for any applications we made in the future.

Only now I'm not so sure I did the right thing!

UK007BullDog

Someone I know just had a mortgage application refused, not because of bad credit, far from it she has excellent credit record, but because she has credit cards (unused) with an available amount over well £50K. The lender told her to close down all dormant accounts and reapply in a couple of months.

I really think that every lender is now looking quite closely on available credit and income etc.

With all the media info from this week alone about people being in serious debt and not being able to pay it back.

The_Boss

Interesting that - someone I knew was accepted for a mortgage on the condition that all listed debts were cleared first. They listed all her credit card bills and she had to provide proof to the solicitor that they had been cleared.

With regards to my mortgage application, I have noticed a discrepency with the search. It lists the given birthday as 21st December 1979 when my birthday is July 21st, and therefore the time at current address is also wrong. I wonder if this has anything to do with the problems I am having.

Clariman

The_Boss wrote:

With regards to my mortgage application, I have noticed a discrepency with the search. It lists the given birthday as 21st December 1979 when my birthday is July 21st, and therefore the time at current address is also wrong. I wonder if this has anything to do with the problems I am having.

Possibly... you could put a notice of correction on your file so that it gets investigated and corrected. However, while the notice is on your file it will prevent automatic creditscoring processes automatically approving you.

The_Boss

So I shall wait for it to drop off on October 1st. Not so sure when I should next apply for a card and might leave it till new year, but the ad I've got for Citi Mastercard doesnt ask for length of employment so might have to use that to apply on October 2nd.