Percent credit used vs total credit available

Sportbilly_2

After doing a lot of juggling earlier on this year- shifting joint and personal overdrafts to a couple of new interest free credit BT cards, getting another 0% BT card to transfer existing credit card balances, and a free overdraft with A&L to pay off a loan, along with a new 5 year fixed mortgage and opening three Halifax Reward current accounts - I got rejected for a card recently, presumably because of the number of searches and the amount of credit I had available.

I closed off as many cards as I could and reduced overdrafts and limits to the minimum I needed, but still got rejected on my next application. I now understand that I should have waited a couple of months at least for it to filter through to my credit report, which I accessed through Experian.

One of the things I noticed on there though, was that they not only record the amount of credit you have available, but also the amount that you're using. In this case, is reducing limits on your cards etc not self-defeating as you'd be increasing the percentage of available credit you're using? Which way is the best way to go?

Karl.H_2

You will have to wait a month for so for the reduced balances to show on your file. I believe you simply have been applying for too much credit so that's why you have been rejected.

Sportbilly_2

I know. What I was asking was for future applications, would it be best to reduce all my limits, thus raising my % credit used, or keep them the same and have a lot of credit potentially available.

YorkshireBoy

All things being equal I'd rather have high limits and low usage than lower limits and high usage. Of course, your income and other circumstances need to be able to support this situation.

You can talk your way out of the former ("I have too much available credit? Really? OK I'll close the card(s) if you give me one of yours and match my highest limit"), but the latter just looks (to a computerised scoring model) like you're maxed out and/or struggling.

Karl.H_2

Ok, well, this page should help you:
http://www.moneysavingexpert.com/cards/cancel-unused-cards

YorkshireBoy

See also this article from the stoozing site...

http://www.stoozing.com/g_score.htm

Be sure to read all 6 pages.

Sportbilly_2

YorkshireBoy wrote: »

All things being equal I'd rather have high limits and low usage than lower limits and high usage. Of course, your income and other circumstances need to be able to support this situation.

You can talk your way out of the former ("I have too much available credit? Really? OK I'll close the card(s) if you give me one of yours and match my highest limit"), but the latter just looks (to a computerised scoring model) like you're maxed out and/or struggling.

That's a good explanation and rationale. The rejection I got was from RBS who 'considered my finances to be fully committed'. Which is more than fair enough, given the amount of credit I had available at the time.

I over compensated by slashing about £12K off my available credit and then reducing it again after another month's payments, in line with the suggestions in the link from Karl.

I'll leave any more applications for a while as everything is now on interest free for at least the next six months (unless A&L get spooked at my overdraft and call it in), and I'll stop reducing the limits on my existing accounts. Hopefully, that will present a more balanced picture.