Should I lower credit limit?

nick1977

I have a Halifax Credit Card which has around £2800 on a L.O.B. promotional rate 5.94%. They keep upping my credit limit, resumably to encourage me to use the card and effectively lose the promotional rate - It's now at £11,850.

I have 2 other cards, one with a £7,200 limit and one with a £1,500 limit. Both of these cards are cleared every month.

I recently got refused for an M+S card, although I am not sure whether this was due to part way through moving house (I had no mortgage at that point) or the high amount of credit I have available to me.

So basically, should I reduce the £11,850 limit, since I am not going to use the card unless they offer me another L.O.B. rate. If so what would be a good figure to request?

Thanks
Nick

chanz4

Do you need more than 2k?

Consumerist

nick1977 wrote: »

. . . So basically, should I reduce the £11,850 limit, since I am not going to use the card unless they offer me another L.O.B. rate.

The problem with reducing credit limits is that a future lender won't know whether you have requested the lower limit or your card provider has imposed it on you i.e. it might appear that you are perceived to be a greater risk by your current card provider.

You might want to consider closing one of your other card accounts. A settled account on your credit file shouldn't do any harm to your credit rating - it may even improve it.

nick1977

chanz4 wrote: »

Do you need more than 2k?

Sorry I don't know what you mean. The card has an outstanding balance of around £2,850...

nick1977

Consumerist wrote: »

The problem with reducing credit limits is that a future lender won't know whether you have requested the lower limit or your card provider has imposed it on you i.e. it might appear that you are perceived to be a greater risk by your current card provider.

You might want to consider closing one of your other card accounts. A settled account on your credit file shouldn't do any harm to your credit rating - it may even improve it.

Thanks. Unfortunately I use both other cards regularly. One is our household expenditure account, and the other is my personal credit card.

I suppose the question I am asking is, is it better to have a card with a £2,850 balance with a credit limit of:

1) £3000
2) somewhere in the middle (name your amount!)
3) the max available - currently £11,850

Nick

chanz4

Sorry didnt see that part when skimming, i would ask for it to be reduced to double your outstanding debt

Consumerist

nick1977 wrote: »

I suppose the question I am asking is, is it better to have a card with a £2,850 balance with a credit limit of:
1) £3000
2) somewhere in the middle (name your amount!)
3) the max available - currently £11,850

I would say (3) for the reason already stated.

A balance of £2,850 on a card with a £3,000 limit may look as though you are financially stressed.

Edit
If you have also recently moved, you really need there to be no doubts about any other aspects of your credit file. My advice would be to leave well alone for the time being.

izools

Important question though - what's your gross annual income?

YorkshireBoy

izools wrote: »

Important question though - what's your gross annual income?

And two more...

Any other available credit in the form of overdraft facilities?

Who's the provider of the £7,200 limit card?

nick1977

Gross annual income approx £29k

Overdraft on Santander bank account £1,400 (unused)
Overdraft on Barclays account £1,500 (unused)
Overdraft on Halifax account £300 (unused)

£7,200 limit is with Egg
£1,500 limit is with John Lewis Partnership card (I am a Partner so this is the only credit card I can use and get credit and staff discount)

Thanks for the help guys

Consumerist

Generally, banks don't like access to credit of more than about half annual income. You seem to have access to around £23.5k of credit compared to an annual income of £29k. The reason for the M&S rejection seems clear. You now also have a credit rejection on your record which won't help either.

It seems that significantly reducing your access to credit would be helpful but I still think account closure is preferable to credit-limit reduction on existing cards.