Is having unused credit cards a "bad" thing?

Nine_Lives

Sorry but i'm aware this could possibly be a fummy question... i just don't know the answer.

Way back when i was starting out i was told that to help build a credit rating/score, you could take out a credit card & pay it off in full.

I did this with who i banked with at the time - Nationwide.

I've since got into stoozing & therefore haven't used my Nationwide C/C for a good few months now (perhaps May).

There's a few bank accounts i don't have, yet i keep them open with £0 in, just in case i ever need to draw on money (e.g. if i need to purchase a car like i did a while ago - you need to give the bank notice, yet with a bit of transferring, i could have over a grand out on the same day. Can't do that in the bank without notice).


Question is, can the same be said for credit cards?

I don't use my Nationwide credit card any more, but i've left it open "just in case". Could this go against me in any way (i don't fully understand the scoring system, so don't know if it could go against me).

Paul_Herring

Two potential problems:
1) You have unused lines of credit which, depending on the limits in relation to pay/other credit you may have, may count as a negative for the purposes of credit scoring were you to apply for more credit elsewhere.
2) People rarely keep an eye on unused, open, accounts - leaving them open for unnoticed fraud on the accounts.

Nine_Lives

I'm sorry but i don't quite get what you're saying in point #1.

Understand point #2. I keep a regular eye on my accounts anyway, so i'd notice anything dodgy fairly quickly.

fozmcfc

Point #1 - Generally lenders will lend up to a certain amount of your annual income, most experienced people here, think about 50% is about the usual.

So if you earn say £20,000 and you have £10,000 of credit used or not, you are at your limit.

So say you want another CC with a £2000 limit, you are best closing down that £2000 limit card that has no offers and/or is no use to you, so you free about some of your available credit.

In my case next year, I will have a couple of unused cards with £4000 + limits on them, I want to get a new 0% for xx months purchase card next year, so will close one or both, because at the moment, I have about 60% of my annual income in used/unused credit.

lisyloo

I think generally it's a bad thing because

1) It CAN impact your credit score if you have too much available credit This depends on how much, your income etc. so is not black & white.
2) Can incurr dormancy fees on cards and lots of people don't read T&C leaflets (including me).
3) Stops you getting a NEW customer deal.
4) If you aren't checking the account then fraud could go unnoticed.
5) If you aren't looking for the card then theft of the card could go unnoticed.

The other side of the coin is that is it good to keep some lines of credit open becuase opening up new credit cannot be assumed to be guaranteed in this credit crunch, so it depends on what other lines of credit you have which could be - an "in use" card, overfdraft, savings or flexible mortgage.
Personally I like to keep my cards down to the minimum I need for section 75, cashback, warranties and cheap use abroad. but then I have other forms of finance as well.

Nine_Lives

Thanks for the replies.

I don't know what my limit is on my Nationwide card. £1,800 comes to mind.

I then opened a Tesco card which had a £2.25k limit. Then i opened an AA card which had a £2.8k limit.

My annual income was £18.5k according to my last P60.

As the Tesco card 0% expires next June & my AA card expires in October i think it is, it's probably best i close the Nationwide card down.

Thanks guys.

lisyloo

Nationwide is useful for buying electrical/electronic goods as it provides an additional 12 months warranty.
Perhaps it shouldn't be unused and you should use whichever card is appropriate for what you re buying depeding on what facilities they have. Some card e.g. Egg Money provide cover for theatre/concert tickets.

I would advise you to get familiar with all the benefits so you can use the right one in the right situation to et max protection.

Pound

I have a few dormant accounts which I need to close but at the moment I have 110% of my net salary available in overdrafts and credit cards.

MrsH78

Thanks for this post and the advice. Just what i've been looking for.

I often move whatever balance i have to different cards when the interest free period runs out. I always close the one i close down and have in recent years had 2 from Tesco and 2 (now) from Santander!!! The credit limit is usually between £3000-£4000.

We also have had for a very long time a Capital one card - it's limit is £6200 we moved the balance of it years ago but i have kept it because they always had particularly good customer service and if we ever needed that amount of money it's nice to know it's there.

Would you recommend I close the Capital one card. We've never struggled to get other cards and i do check it sometimes so....? What do you think? I've read the back of a statement and there doesn't appear to be a dormancy charge.

Ta

lisyloo

Would you recommend I close the Capital one card.

As you say it's a balance between the points I mentioned and keeping a line of credit open.
There is nothing "BAD" about havign the cards, it all depends on your situation, there are some pros and cons.
I have had up to 4 cards recently. I don't like havingh too many but it's been necessary to maximise cash back, 0%, warranties, insurance, abroad etc.

pauljoecoe

When I recently applied for a mortgage with first direct I only mentioned the cc's I was using at the time. They quizzed me about all the unused cc's I had (they had discovered them through a credit rating search) and said that all the credit available on them would count against me i.e. treated as credit being used, as i could technically use them all (there was a credit limit of around £50.000 in total) making my outgoings rather high.

Fortunatly our joint income and equity in our house meant that it wasn't a problem but it could have been in different circumstances.

The only thing stopping me closing these accoounts is finding out the addresses to contact and writing the letters!