What proportion of credit card credit to your income do you have available?

Megalomaniac

Hi there,

I currently have 5 credit cards:

Egg Visa - £5000
Egg Money - £3600
Nationwide - £3150
MBNA - £5900
Halifax Clarity - Supposedly around £6000

In total this is £23,650, which is equivalent to 66% of my salary. I don't owe any money on any of these accounts and have only recently applied for the Clarity card due to Nationwide's contempt for its customers.

What I was wondering is whether this is too much? How much credit as a proportion of your income do you have available? I'm going to be applying for a mortgage in a year or so, and want to get my credit report in top shape. Should I think about closing some of these cards? However at the same time, if I kept them open surely it shows I am able to manage my finances well?

Thanks

stephane_2

You should close at least 3 of them especially as you don't use any of them...it will certainly not show that you're managing your finance well but showing that you could overstretch yourself, a lender would see that as money you could all spend tomorrow...and how would you pay it back

Megalomaniac

I would close MBNA - have been thinking about this. However, Egg Visa is the card I have had the longest and I thouhgt you should always keep your oldest card?

choc_mouse

Megalomaniac wrote: »

I thouhgt you should always keep your oldest card?

I once had that idea. Had my Natwest credit card since my student days but they wouldn't increase my measly limit (~£1200) one day to meet my requirements (was travelling in the summer) so they fell right to the bottom of the pile in terms of usefulness for me. Quickly switched to another card who gave me double that and the last time I checked, they now offer me over £10k credit but of course my circumstances have changed.

Anyway, I think they'll look at your credit profile as a whole e.g. if you've missed payments in the past X years. (X - sorry, don't know how long they keep the records for.) Also, assuming you're not using all £23,650 of your available credit, it's likely the amount actual used is small, say £1k, so credit providers might not think you are worth lending to because you don't use the credit - but mortgages are probably a bit different here.

fozmcfc

I have 5 -

Egg Visa - £500 (cut limit down as wasn't using)
Halifax - £4800 (newest on 10 months 0% purchases, £65 outstanding)
Tesco - £4300 (just finished 12 months 0% purchases)
Virgin - £6000 (just finished 16 months 0% BT)
Natwest - £2100 (oldest card, my bank, £50 purchase a month)

Also a loan which has £4600 outstanding at the moment.

Virgin, Tesco, Halifax were aquired and used to help me with clearing my credit card debt and keeping it clear.

Salary well it can vary but normally I earn between £32,000 - £35,000 before tax.

So gone for 40% - 59% for poll. My total outstanding debt on cards is less than 1% and my total debt to salary ratio is in the 0-19% area.

hopefulfooluk

I have one card with a £250 limit. My gross pay is around £50k/yr.

So I have 0.5% of my annual salary available to me to borrow Seems responsible!

joerugby

I have one credit card with a £10,000 limit, approx 15% of our gross income. Not sure why I would need another one.

lisyloo

Not sure why I would need another one.

Well I do try to minimise my cards for fraud (and other reasons) but I have good reasons for all the following

Egg - 1% cashback - to maximise cashback
AMEX 5% cashback (can't close until 1 year)
MBNA 0% card for items I want to delay paying for
Halifax Clarity - to minimise fees abroad

So I have good reasons for having all 4, but will close AMEX and MBNA as soon as I can, but you have to keep AMEX for 1 year.

So really it depend on whether you want to maximise cashback and minimise foreign fees.
If you do then you need to have several cards and be a bit of a tart.

joerugby

lisyloo wrote: »

Well I do try to minimise my cards for fraud (and other reasons) but I have good reasons for all the following

Egg - 1% cashback - to maximise cashback - we get points on our card which pay for flights, hotels etc, we are happy with this
AMEX 5% cashback (can't close until 1 year) - see above
MBNA 0% card for items I want to delay paying for - does not apply
Halifax Clarity - to minimise fees abroad - when we travel we take around £500 in cash and pay for the rest on Visa, it's easier

So I have good reasons for having all 4, but will close AMEX and MBNA as soon as I can, but you have to keep AMEX for 1 year.

So really it depend on whether you want to maximise cashback and minimise foreign fees.
If you do then you need to have several cards and be a bit of a tart. My wife wouldn't like that

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Jigga

The orthodox view on MSE appears to be to have max 50% credit available to salary and I can understand this reasoning for staying within parameters of personal risk, applying for more credit, etc. However I have 116% of credit available over nine cards and have found it very useful for BTs between my cards to take advantage of 0% deals that I get offered on a regular basis. Aside from BT fees, I haven’t paid any interest at all on my credit for the past three years. Of this 116%, I only use 50% of it to have room to shift the debts around.

Admittedly I haven’t applied for any new cards in the past year as I doubt if I would be accepted, but whilst the BT offers keep coming in on my current cards I’m satisfied with my position and I do have the intention of paying off the debts and reducing my number of cards within the next twelve months

Curt.

lisyloo wrote: »

Egg - 1% cashback - to maximise cashback
AMEX 5% cashback (can't close until 1 year)

So I have good reasons for having all 4, but will close AMEX and MBNA as soon as I can, but you have to keep AMEX for 1 year.

(Cut out other parts of the quote to address elevant section).

How comes you plan on keeping the Egg and will get rid of the Amex? Even after the 3 month period is up the general rebate allowance for Amex is better than the Egg one, no?

Not to mention Egg has a fee for the card doesn't it?

Or is it to do with the fact Amex is not so widely accepted? Just intrigued.