Advice needed... credit limits/cards

Wurzelgum

Hi all,

Just a quick question if some knowledgeable person could assist?!

I have heard that everyone has a certain 'credit limit'....i.e. if you have a loan and a credit card up to this 'limit', you will not be able to obtain any more credit.

I ask because a friend is using a really high interest credit card, when I told them to apply for an interest free one they said that their credit rating is too poor and they are up to their 'credit limit' because they also had a big loan.

I thought it would be worth trying for a 0% one to boost the speed at which their credit card amount is paid back.

So whats the truth?

Many thanks

Derivative

Lenders look at your total credit available when making a decision.
For example, if you were on 20k a year and have a 2k overdraft, 8k credit limit on your card already.

They might take the view that borrowing half your salary (unsecured) makes it riskier for them to lend you any more.

billymadbiker

Most lenders will look at a credit ceiling based on your yearly income.
They will not want to see a debt over a certain % of your salary.
If you are up to your % limit - ie nobody will lend you any more money, your only option is to pay back what you can, reduce your credit limit on the card (by phoning them and asking to reduce the limit to just over the outstanding balance) then applying for a 0% card with a limit of what you have paid off. Transfer from the higher to the 0% card. You could do this every 6mths or so but you really want to be paying all available money onto the higher apr card so it will still take a while.

With loans, they are not quite the same as they also report to the credit agenicies in the same way as credit cards do.
For example, say you take a £10,000 loan over 4 years, if after 2 years you have paid back £5,000 your credit report will show £5k outstanding/Total Credit £10k.
While this looks good to lenders if you apply for a mortgage (they can see you can afford to pay back £10k every 4 years) it also looks to other lenders that you have £5k of debt and £5k more available.
Even though you can't actually withdraw the £5k you have previously repayed off the loan.

All you can really do with this is (if you got the loan from your own bank in person) is ask them for a settlement figure for the existing loan then ask to borrow a few quid more.
If, as above, you originally had £10k and have paid back £5k you could say you need to borrow another £1k.
You would then take a loan for £6,000. £5k of wich the bank would use to pay off the existing loan.
You would then use the extra £1k to pay toward your credit card debt (providing the loan was at a lower apr than the cc) and your credit file would show a lower amount of £6k available credit.
You 'should' then be able to get a 0% card with a £4k limit that you could move some more high apr onto.

All presuming your credit history is good of course!