Reduced limit. Now what?

Not_so_Richy_Rich

After getting some good advice from the site I decided to pay a lump sum off my balance and reduce my credit limit on one of my cards. £10,400 limit was reduced to £3000.
I now owe £2600 on this card.
Does anyone know
a) How soon the reduction in credit limit will show on my credit file?
b) Will it benefit my 'available credit' ?

Thanks

DizzleUK

A: Anything up to a couple of months, depending on when in the month the company reports to the CRAs

B: Your overall available credit will be reduced to reflect the lower credit limit on that card. If your available credit (with the higher limit) is near or in excess of your annual income, then the reduction could be of benefit if you choose to get other lines of credit in the future. Companies don't like to see consumers "overexposed".

SCO

Not_so_Richy_Rich wrote: »

After getting some good advice from the site I decided to pay a lump sum off my balance and reduce my credit limit on one of my cards. £10,400 limit was reduced to £3000.
I now owe £2600 on this card.
Does anyone know
a) How soon the reduction in credit limit will show on my credit file?
b) Will it benefit my 'available credit' ?

Thanks

Think it takes a couple of months for credit files to update.
The only thing i can think might look negative for you is that you are now showing you a nearly maxing out the card instead of having a good gap between debt and credit.

guesswho2000

Should show within a couple of months, depends how often the issuer updates CRA details.

It will show your available on that particular card as £400, nearly an 87% credit utilisation on that card, it's best to keep utilisation below 60% really...

As to whether this will be detrimental or not depends on the total of your limits and available credit with all your lenders, for example if you have another card with a £5000 limit and £1000 balance, that card is only 20% utilised, and your overall credit utlilisation would be 45% (£3600/£8000 total)

Not_so_Richy_Rich

Thanks!
In a nutshell then I should have left the card with the £10,400 balance?? Aghhhh

I was thinking it would increase my chance of a 0% BT to finally pay off the remaining £2600.

Money_Man

Not_so_Richy_Rich wrote: »

Thanks!
In a nutshell then I should have left the card with the £10,400 balance?? Aghhhh

I was thinking it would increase my chance of a 0% BT to finally pay off the remaining £2600.

Yes your absolutely spot on - why are these boards full of people advising people to call card companies and reduce credit limits - its nonsene

izools

Oh I see so the balance was close to the #10,400 limit before clearing a chunk anyway? So your utilization on that card was be a high percentage anyway.

In that case, it's definitely good that they reduced the limit. Your utilisation has remained largely the same but your exposure has dropped dramatically.

Definitely a very good thing for your credit worthiness :beer:

P.S. - the old limit will reflect on your credit report, too, so they will know you are nowhere your old limit when you apply elsewhere

guesswho2000

Not_so_Richy_Rich wrote: »

Thanks!
In a nutshell then I should have left the card with the £10,400 balance?? Aghhhh

I was thinking it would increase my chance of a 0% BT to finally pay off the remaining £2600.

Paying the balance off was the right thing to do, although you possibly should have left reduced the limit to maybe £5000.

If the £2600 is your only borrowing, and that card is your only one then you may be ok applying for a new card, especially if you have nothing adverse on your credit file.

No harm in trying, although pick the card carefully and if you get rejected don't apply for any more until you've paid off another £1000 say, that may then put you in a better position to lenders.

SCO

Not_so_Richy_Rich wrote: »

Thanks!
In a nutshell then I should have left the card with the £10,400 balance?? Aghhhh

I was thinking it would increase my chance of a 0% BT to finally pay off the remaining £2600.

A reduction to 5k would have been better.

izools

SCO wrote: »

A reduction to 5k would have been better.

It wasn't his choice. The limit was reduced by the card company as he was demonstrating signs of debt stress by riding the account close to its old limit for a long time.

Money_Man

izools wrote: »

Oh I see so the balance was close to the #10,400 limit before clearing a chunk anyway? So your utilization on that card was be a high percentage anyway.

In that case, it's definitely good that they reduced the limit. Your utilisation has remained largely the same but your exposure has dropped dramatically.

Definitely a very good thing for your credit worthiness :beer:

P.S. - the old limit will reflect on your credit report, too, so they will know you are nowhere your old limit when you apply elsewhere

Lets just hope the other lender thinks he called up to reduce the limit as oppossed to seeing this as a negative i.e reduced by the card company for another reason - I cant see the logic of telling people to reduce credit limit when you know so little about what their individual circumstances are