Credit Ratings V Cutting Up The Credit Cards

MaDcOW_4

Hello,

Recently I have been lucky enough to be able to clear all my credit card and loan debts.

As I never want to be in the position of being in the red, I am determined to never own a credit card or apply for a loan again.

But I still have two credit cards (Halifax, Capital One) and one store card (Next)left over. When I have spoken to the finance companies to cancel my membership they have all tried to talk me out of cutting up the plastic for good by explaining this will have a affect on my credit rating.

Please could someone honestly tell me, how important is it to have lending history as all I will ever want in the future from a finance company will be a mortgage. I also feel all the time this accounts are still open, I have that temptation to spend is there.

Thanx

MaDcOw

mintymoneysaver

I don't know how much it will adversely affect your credit rating, but if you now owe nothing how about getting a cashback credit card, put all your monthly spends on it, clear it at the end of the month and then get cashback? You will get a great credit rating and earn something from it too?
P.S I would definitely ditch NEXT, too much of a temptation!

gingercordial

Generally people say on here that the effect of closing cards on your credit rating will be a good one.

However, it's true that a long history of responsible use of credit cards is something that lenders (including mortgage lenders) look for. I would close Next (way too tempting, you don't need it) and then I would close whichever of Halifax and Capital One has the highest APR. Keep the other one. If you want to, ask them to reduce your credit limit right down so you can't rack up spending on it. Then either cut up the card so you can't use it, or try the technique of putting it in a bag of water and freezing it so you have to defrost before use! That way your history will build up nicely but you won't be getting into debt again.

minty's advice is sound in terms of financial reward, but please only do this if you can honestly say to yourself that you will not run up debt again. I've no idea about your willpower of course, but you mention that temptation may be there and I think this could be just too dangerous at the moment.

CTT_2

As I never want to be in the position of being in the red, I am determined to never own a credit card or apply for a loan again.
UNQUOTE.

Sorry am I missing something. You already say you do not want to own a cc or apply for a loan again so why concern yourself what accounts stay open or closed.

---lee---

CTT wrote:

Sorry am I missing something. You already say you do not want to own a cc or apply for a loan again so why concern yourself what accounts stay open or closed.

This bit I think:

...how important is it to have lending history as all I will ever want in the future from a finance company will be a mortgage.

---lee---

As suggested, ditching your current cards and using a cashback card for monthly spending would seem prudent. Be sure to setup a direct debit for the full monthly payment and limit your spending carefully. That way, you will continue to maintain a good credit history.

I treat my cashback card just like a debit card. I only use it for spending that I would normally make, as if I'm spending money from my current account.

PS. Cutting up credit cards is remarkably therapeutic and an opportunity not to be missed

The_Boss

Closing credit cards had a MASSIVE negative effect on my ability to get credit, and therefore my credit rating

Take a read of this : http://forums.moneysavingexpert.com/showthread.html?t=175234