Credit Limit Halved - What do I do

bingy_burge

I am a new barclay card customer I was going to put 100-200 on my card every month and pay it and in full so it improve my rating and after 6 months they might increase my limit so I am told. Is it just this chap moving that has caused the issue. I stay 100 away from my limit.

CannyJock

jhow wrote: »

To build up the credit rating you should use the card for a few small purchases a few times and only pay a part of it off on a monthly basis because thats the way they like it. They will then increase the limit if you phone and say something like you are going on holiday and need a bit of extra credit in case you get stranded. Failing that get another card and use it a few times, but do not pay it off in full because they are not making any interest, so they dont like that. You build up the credit rating when you pay them little and often, kind regards, Jo.

Costly advice. Can't agree with any of it. Have you done this yourself or are you just speculating?

To build up a credit history, use credit that you have available to you. Pay in full to avoid any interest.

After 6 months your chances of a credit limit increase upon request will be based on your payment history - surely paying "more" will make you less of a risk that paying "less"?

nickmack

jhow wrote: »

To build up the credit rating you should use the card for a few small purchases a few times and only pay a part of it off on a monthly basis because thats the way they like it. They will then increase the limit if you phone and say something like you are going on holiday and need a bit of extra credit in case you get stranded. Failing that get another card and use it a few times, but do not pay it off in full because they are not making any interest, so they dont like that. You build up the credit rating when you pay them little and often, kind regards, Jo.

Ironically, this method probably does have some basis once you've moved on from Sub-Prime cards.

Creditors generally look for a the best combination of low risk and high profit for their customers.

Upon consulting your credit report, it's quite possible part of their scoring criteria would take into consideration those who do not repay in full each month and leave a perpetual balance, as being one of the most profitable.

It's not the best situation for the customer, but when it comes to credit scoring, these matters often aren't.

Moggles_2

nickmack wrote: »

Ironically, this method probably does have some basis once you've moved on from Sub-Prime cards. Creditors generally look for the best combination of low risk and high profit for their customers. Upon consulting your credit report, it's quite possible part of their scoring criteria would take into consideration those who do not repay in full each month and leave a perpetual balance, as being one of the most profitable. It's not the best situation for the customer, but when it comes to credit scoring, these matters often aren't.

This is just conjecture though, isn't it?

IME, based on a dozen years of credit card usage with over 50 cards (not all at once of course), provided that you always pay up on time (either yourself or courtesy of another credit card) and keep within the Ts & Cs, your credit history and therefore your credit limits will steadily improve. It's not necessary to line the card companies' pockets by setting out to pay some interest.

NickX

Moggles wrote: »

IME, based on a dozen years of credit card usage with over 50 cards (not all at once of course), provided that you always pay up on time (either yourself or courtesy of another credit card) and keep within the Ts & Cs, your credit history and therefore your credit limits will steadily improve. It's not necessary to line the card companies' pockets by setting out to pay some interest.

Absolutely the same as my experience and I have been stoozing for 8 years. I never ever pay any interest when I don't have to and have never had any credit history problems.

negg

It makes no difference if you pay the card off in full or not, the credit card company still makes money as they charge the shop every time a card is used. It doesn't have any effect on your credit rating unless you miss payments.

Moggles_2

enigma368 wrote: »

I don't really need the credit that badly so am I better off, from a credit rating point of view, cancelling the card immediately? ... Does anyone know if I should keep my credit card or cancel it before they report the reduced limit to CRAs? Is it going to make a difference either way?

Your recent move plus the repeat applications to LloydsTSB (I read your other thread) would have temporarily disrupted your credit rating, unfortunately, so you may not get a better limit elsewhere should you change your mind later.

As you know, lenders like stability, so best practice when building a credit history is to apply for credit facilities/increased credit limits, where possible, before you move/change jobs/change banks. Being with the same employer, bank and current address for a while, all help when applying for credit. Basically, the longer you stay put the better, as far as your credit history is concerned

Are the Lloyds TSB credit card and Barclaycard the only credit facilities held in your name here in the UK? I would check your credit files to make certain at least two accounts are reported to the credit reference agencies before you cancel your Barclaycard.

nickmack

Moggles wrote: »

This is just conjecture though, isn't it?

I'm not privy to the Credit card acceptance scoring algorithms, but I'm sure you'll agree, all other matters equal, a provider would rather have a customer that make them the profit from monthly interest than leaves no balance.

The Egg account cull of recent times which appeared to be aimed at bad risks and customers who delivered low profit returns shows how cherry picking is becoming more prevelant.

It's not necessary to line the card companies' pockets by setting out to pay some interest.

No, absolutely it's not and that would follow the MSE ethos. As a customer you need to go for the 'best deal' available to you.

My comments should have really referenced CannyJock's reply to put it into proper context:

CannyJock wrote:

surely paying "more" will make you less of a risk that paying "less"?

I agree with the sentiment, but practically, it doesn't always seem to be the case when it comes to new business acceptance. Until the recent 'credit crunch', the emphasis on acceptance criteria was weighted towards profit making customers rather than 'good risks'.

To me, the irony of credit scoring means that sometimes the 'best deal' may not be available to those who are assessed to provide little or no profit, whereas it primarily should be used to help protect the lenders from 'bad risks'.

This seems to have shifted somewhat, but you only have to see some of the posts on here for individuals who've been refused a credit card with seemingly 'perfect' credit histories (all payments up to date and paying in full each month) to realise this is still not always the biggest consideration.

Paul_Herring

nickmack wrote: »

I'm not privy to the Credit card acceptance scoring algorithms, but I'm sure you'll agree, all other matters equal, a provider would rather have a customer that make them the profit from monthly interest than leaves no balance.

More conjecture.

Here's another:

I'm sure you'll agree, all other matters equal, a provider would rather have a less risky customer who pays off what they owe every month, rather than a more risky one who leaves debt on there.

Given today's economic climate, which of the two do you think is more likely?

The Egg account cull of recent times which appeared to be aimed at bad risks and customers who delivered low profit returns shows how cherry picking is becoming more prevelant.

From what I read, I got the impression they just used a random number generator on their customer database.

nickmack

Paul_Herring wrote: »

I'm sure you'll agree, all other matters equal, a provider would rather have a less risky customer who pays off what they owe every month, rather than a more risky one who leaves debt on there.

Given today's economic climate, which of the two do you think is more likely?

If you read the last paragraph of my previous post, you'll see I agree the stance of many providers has become more risk averse.

However, it's still all about striking the balance between taking on risk and making profit. They all want their 'perfect' customer who pays lots of interest and never defaults, but the two rarely go hand in hand. It's not necessarily *too* risky that a customer leaves a debit balance, only if they show others signs of not being able to meet the repayments.

It's also been about redefining how they interpret the risk. Additional information such as Cash Withdrawls, Minimum Payments on your credit report help them do this.

From what I read, I got the impression they just used a random number generator on their customer database.

:rotfl:
With Citigroup anything is possible!