Closing/cancelling credit cards

Joe555

Good morning

I have had a look at previous threads on the pros and cons of closing credit cards, but as most are several years old I thought I would ask for any thoughts.

I currently have 4 credit cards

1) Limit £7500 balance £0
2) Limit £4400 balance £0
3) Limit £2000 balance £0
4) Limit £600 balance £550 (used for groceries and petrol, paid off in full each month, no interest ever paid)

So a total of around £14500 with between £0 and £550 used at any time.

I must point out that I have recently paid all these off, prior to which I had been using between 75-90% of what was available. Consequently I am now very debt averse, and was going to simply close all but number 4) and number 3) for emergencies. However, some of the advice on previous threads suggests that this could adversely affect my credit score and I might be better keeping them.

So, firstly, where does the balance lie between having credit available and not using it, and having too much available?

Secondly, I am aware that your payment history stays on the credit file for some years - mine should be good as I have never missed a payment on anything, and never exceeded a limit. But does the record keep a track of how much of your limits you were using, ie. would it show that for some considerable time I was at 90%, or will it just show that I have had the card for x years and have £0 on it?

If it's relevant, these limits are against a salary of approximately £34000, and I have no other debt save the mortgage.

Thanks in advance

Joe

(And to save anyone the trouble, I've had all the 'look at why you were using so much credit advice' on a previous thread )

lisyloo

So, firstly, where does the balance lie between having credit available and not using it, and having too much available?

Well this is the 64 million dollar question.
£14.5K would be a lot on a £10K income but not a lot on a £100K income, so that's one factor.

You want some credit history and lines of available credit.
Note if you close a card your history will stay on for 6 years, so it doesn't instantly dissapear when you close a card.

You need to keep credit available.
Do you have enough elsewhere for emergencies? If you have savigs then you have less need for credit than if you have no savings.

would it show that for some considerable time I was at 90%, or will it just show that I have had the card for x years and have £0 on it?

Some cards now show exteneded information e.g. balances.
AFAIK this is fairly recent.

If it's relevant, these limits are against a salary of approximately £34000

42% is not a problem at all (debt to income ratio).
Although you might want to consider issues of
1) you need to close cards to get new customer deals
2) incativity charges
3) theft/fraud especially on cards you aren't regularly checking. Personally I think each card presens a risk so why have them unnecessarily.

on the other hand you want some lines of credit open for emergencies.

and I have no other debt save the mortgage.

Do you have any savings though? for job loss, boiler repairs, car crash or even buying a holiday?

I don't think there is any rush to do anything as your debt ratio is not an issue.
If you have no savings then I would start building an emergency fund and perhaps then you can be more confident about closing lines of credit.

BTW - keeping a large limit if good as your limits affect future limits.
So maybe close the £2000 limit first.
But I think there is no need to rush into doing anything.

Joe555

Thanks lisyloo.

Yes I have both savings and emergency funds available.

As you say, there is no desperate rush. The next (anticipated) issue for me will be remortgaging once my fixed rate finishes in 12 months or so. I can use my savings to make a substantial reduction in my LTV ratio, but was just looking at what else will be seen as positive or negative by lenders.

lisyloo

Don't leave yourself too short of cash.
I dont' know what job you do or whether you have redundancy insurance, but you might need to support yourself in an emergency.
You coul also look at offset mortgages where you can have the best of both worlds.

bignred05

I have several credit cards that I have not used for quite some time (nor will not use in the future) could someone please confirm if by cancelling any of these cards this will affect my credit rating score

for the record I have no outstanding balances on any other credit cards either

Thanks