Credit Rating - % of credit used versus total credit?

Chris999

Hello there,

I'm hoping you can answer a question I have about credit ratings.

I've been doing a lot of reading on the site and have realised the importance both the total amount of credit you have available and the percentage of that credit you have used on your credit rating.

My question is, which is more important?

My scenario is that I have a £1500 0% overdraft (graduate account) and I have £1500 on a 0% credit card. I currently have the money to clear these invested in an ISA.

I want to make sure I am managing my finances in the best way to give me a good credit rating.

I have 3 credit cards including the one with the 0% deal.

One of these cards has an £8000 limit. I do not use this card and I do not require such a high limit.

I was about to close the £8000 card but then I realised that this formed the bulk of my available credit. Currently I have circa 25% of my available credit in use. If I close this card, I will have 60-70% of my credit in use.

Which will be best for my credit rating? Having a low percentage of my salary as total credit available, or having a low percentage of total credit used?

Do I close the £8k card or not? Is knocking £8k off my total credit more attractive to lenders than using only 25% of my total credit?

I want the ability to be able to apply for cards such as Halifax's Clarity for overseas spending etc.

Many thanks in advance for any advice you may have.

izools

In your circumstances I would suggest recuding the £8,000 limit to £2,000.

This way you are neither showing signs of debt stress by having accounts close to your cumulative limits, nor are you showing signs of potential overcommitment, with cumulative credit limits adding up to a large portion of your annual income

torrenter

Well, I have found out today that having my Credit Report corrected to show 0% utilisation, rather than 39% had increased my score by 50 points. Substantial to me. It took me on Experian from "fair" to "good". You could say this is neither here nor there, but utilisation does play a part.

Then again, I have a very low total limit, and £8000 of unused credit could be cancelled to give you more chance of a higher limit on a Clarity card. Again 60% to 70% utilisation is NOT good, I think. It's a toughie, but I think the compromise izools suggested might be the best option.

Remember to make sure you report is up to date BEFORE you apply. It will save you a lot of frustration. £2 Statutory, nothing more, nothing less.

th081

I would leave your 8k card as it is, it depends how much of a limit you want on the card card you apply for, if its a couple of k your looking for i cant see it making a difference.

Your 8k card shows you have operated that account correctly and with no issues