Credit Limit Halved - What do I do

Moggles_2

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.

I'm with Canny on this one.

From the lender's perspective, predicting how a credit card applicant will handle credit is tricky. They cannot assess you directly. The best indications they have are the payment histories and credit limits on your existing accounts with other lenders. 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 will steadily improve. Leaving part of your balance on a card attracting interest is unnecessary.

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.

Naturally the victims of this cull have posted frequently on this board (and who can blame them?), but I don't think we can leap to conclusions without knowing the experiences of everyone else. I myself have held an Egg card almost since launch and, despite making the bank no profit, I have escaped the net, so I haven't contributed to these threads.

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'.

You would think so, wouldn't you? However, in my experience, the fact that you've made money from the card companies, rather than the other way round, seems to have no influence whatever on the new credit cards and repeat offers you can expect. IMO, eliminating bad risks has always been the overriding concern of lenders.

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.

Sorry, this has not been my experience personally.

The more balances I've paid off/transferred to other card companies, the better the repeat offers. This was particularly noticeable when, due to mergers and a take-over, I had balances on four MBNA cards. Whenever I cleared a balance, usually by requesting a transfer elsewhere, a repeat offer was a near certainty,

Of course lenders may vary, in this respect, as with everything else and things change over time. It will be interesting to see whether the additional data, such as cash withdrawals, that some lenders are now reporting to the CRAs makes a difference.

nickmack

Moggles wrote: »

From the lender's perspective, predicting how a credit card applicant will handle credit is tricky. They cannot assess you directly. The best indications they have are the payment histories and credit limits on your existing accounts with other lenders. 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 will steadily improve. Leaving part of your balance on a card attracting interest is unnecessary.

As you say with new business, it's tricky. The information they can use is the history and conduct of your existing accounts and any additional information you provide in the application such as income.

Risk is of course a factor, but the key to being a successful creditor is taking on the right amount of risk for the maximum profit.

IMO, eliminating bad risks has always been the overriding concern of lenders.

It may well be *more* of a concern now, but the huge amount of personal debt amassed and large number of defaults from creditors lending without assessing the risk properly over the last decade, seems to suggest otherwise.

Of course lenders may vary, in this respect, as with everything else and things change over time. It will be interesting to see whether the additional data, such as cash withdrawals, that some lenders are now reporting to the CRAs makes a difference.

Indeed it will, it should help raise that red flag a bit sooner and hopefully will mean more accurate risk analysis.

Moggles_2

nickmack wrote: »

It may well be *more* of a concern now, but the huge amount of personal debt amassed and large number of defaults from creditors lending without assessing the risk properly over the last decade, seems to suggest otherwise.

OTOH, perhaps it merely serves to underline what a blunt instrument credit scoring really is. It certainly doesn't justify leaving a balance on a credit card attracting interest at your standard rate, IMO

nickmack

Moggles wrote: »

It certainly doesn't justify leaving a balance on a credit card attracting interest at your standard rate, IMO

Absolutely, that's the point. My initial suggestion was it's ironic that if you appear to pose a 'low risk' by showing the ability to make full repayments, you could well be penalised in terms of 'credit scoring' because (potential) profit is part of the acceptance criteria.

Moggles_2

nickmack wrote: »

Absolutely, that's the point. My initial suggestion was it's ironic that if you appear to pose a 'low risk' by showing the ability to make full repayments, you could well be penalised in terms of 'credit scoring' because (potential) profit is part of the acceptance criteria.

This is conjecture though, isn't it? Best not to second guess too readily how credit card companies view things.

We don't know how any given lender views our credit files. The important thing, IMO, is not to part with money unnecessarily

Jemma-T

enigma wrote:

Credit Limit Halved - What do I do

Spend less.

The banks don't have (and never did) the money should everyone max their cards so they're reducing people's spending potential.

DD4

Credit Limit Halved - What do I do ?

Live within your means and see this as a 'wakeup call'. The days of cheap credit are over and the best thing anyone can do for their finances is to learn to balance their income and outgoings and to live within their means.

If you're finding it hard to make ends meet financially, instead of getting credit which only makes matters worse due to the excessive charges, try to increase your income by doing extra hours at work or a second job in a pub or supermarket (or whatever). Another option is to reduce your outgoings, look at what you're spending on to see if there are any unneccesary expenditure.

enigma368

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.

Well my repeat Lloyds applications never made it onto my credit report I dont think, because they simply used internal scoring to judge those applications. However I think you right about the move. I just found out that I will not be put on the electoral roll for my new address until December 1st. I'm pretty sure this is why they have reduced my limit. I should have waited to report my new address until then...

Quote:
Credit Limit Halved - What do I do ?
Live within your means and see this as a 'wakeup call'. The days of cheap credit are over and the best thing anyone can do for their finances is to learn to balance their income and outgoings and to live within their means.

If you're finding it hard to make ends meet financially, instead of getting credit which only makes matters worse due to the excessive charges, try to increase your income by doing extra hours at work or a second job in a pub or supermarket (or whatever). Another option is to reduce your outgoings, look at what you're spending on to see if there are any unneccesary expenditure.

Sigh...With respect, please at least read the initial post of a thread, rather than going on a tirade based only on the thread title. If you had read my post, you would have realised my problem has nothing to do with me needing credit, but rather to do with me wanting to build up a respecable credit history in the UK. As I said in my post, if you had bothered to read it, I could cancel the card, I dont need the credit, I just want a good credit rating for when I do need credit.

Anyway I don't think the reduced limit is going to harm me too much (how do they know I didnt ask for it to be reduced), so I will leave it.

property.advert

My experience from over 30 cards over a 15 year period does not back up some speculation here. Without fail, the quickest way to increase a credit limit was to have a balance which you did not pay fully but certainly made at least the minimum repayment. The absolute quickest way was to quickly introduce (not transfer) a large balance and then proceed to make the minimum payments but also clear the total debt within two or three months.

Just think about it. If you are lending someone 1k then 3k and then 5k etc. and each time they pay you back in full with some interest, then it is obvious that you will be considered a good risk for a higher limit. Messing about with £500 on a 7k is going to do nothing.

Also, those advocating never paying interest should keep to their argument as this particular slant is to raise credit limits, not pay the least.

I am talking of limits here in the 5-20k each range.

izools

enigma368 wrote: »

I do have a limited history as I have only been in the UK for two years(Im Irish). And this is their Classic card. The whole point of getting it was to build up a decent credit history, which is why I was being so careful and paying it off in full each month. Now they are screwing me over, even though I have done everything by the book. I cant seem to win...

I meant MBNA classic

And FYI Barclaycard reduced my card limit from £2,000 to £750 after 18 months despite never having missed a payment, never going over limit, and always paying well over the minimum but leaving a balance so they make money.

I cleared it, said "I'll Leave if you don't up the limit back to what it was" and they refused point blank. They did however reduce my APR to 9.9% which was nice, so I kept the card.

It was written into a bankruptcy order six months later