Been given a credit limit increase, is it best to reduce the limit if I wont use?

richardc1983

As above Vanquis have given me a credit limit increase for managing my account well. I first got this card to rebuild my credit file by making purchases each month and paying off in full the statement.

They have now given me a couple of increases. Originally from £250 to £750 and now one for £1500.

I never use any more than £250 each month on this card as I pay it off in full as the interest rate is very high. I have cut this card up yesterday as I also have a virgin credit card which has a much more reasonable interest rate and intend on using this monthly. This has a credit limit of £1500 which is what I got when I applied for the account.

Now a couple of questions. As I am no longer going to use the Vanquis card, is it better to reduce the credit limit back to £250 on this card or close the account completly if not intending on using it. Which looks better on my credit report for example if I want to apply for a mortgage? With regards to the Virgin Card since I will only use max of £400 is it best to also reduce the credit limit on this card?

I have been told too much credit can look bad even if it is all top notch and paid off etc. I have also been told however that if I leave the credit limit as it is any lenders or companies running a credit check will see I have credit available to me but not using it and this could be a good thing. Whereas if I have a smaller credit limit but I am always maxing it out at the smaller ammount I know I will use this can go against you even if I pay it off in full each month?

Any help greatfully received.

Kind Regards
Richard.

chanz4

Personally keep it open, but shred the card. It will be better also if closing to keep the higher limits as it looks better.

richardc1983

chanz4 wrote: »

Personally keep it open, but shred the card. It will be better also if closing to keep the higher limits as it looks better.

How do you mean "if closing keep the higher limits"

CLAPTON

without knowing what other credit lines you have or what credit lines you actually use it's an impossible question to answer

richardc1983

CLAPTON wrote: »

without knowing what other credit lines you have or what credit lines you actually use it's an impossible question to answer

Only have the two credit cards mentioned. Mobile phone contract. Virgin media tv and broadband. Oh and a car loan took out in June.

I have no other credits or debts.

CLAPTON

two credit cards are fine
a limit of 1,500 is quite modest

however I would suggest you use both cards and pay in full each month; they might close an unused card and it's useful to have a back up card in case one is rejected for any reason

and pay off the loan asap, start to save for things you want and avoid any future credit (except mortgage)

malcolmffc

Use the vanquish card to buy an apple once a month and pay in full. That way your credit file will continue to be updated with "satisfactory" markers

richardc1983

CLAPTON wrote: »

two credit cards are fine
a limit of 1,500 is quite modest

however I would suggest you use both cards and pay in full each month; they might close an unused card and it's useful to have a back up card in case one is rejected for any reason

and pay off the loan asap, start to save for things you want and avoid any future credit (except mortgage)

Thank you. I also have a couple of bank accounts one with an overdraft. I got the car loan as have no savings I aim to pay this off over 3 yrs. I also don't think I will be able to save for a mortgage as I rent now. By time car loan is paid off will prob be time to get another.

CLAPTON

overdraft is an ambiguous term
to have an overdraft facility is sensible for emergencies but to use it regularly is bad for your credit rating as it shows you either can't live within your income or are bad at financial management

richardc1983

CLAPTON wrote: »

overdraft is an ambiguous term
to have an overdraft facility is sensible for emergencies but to use it regularly is bad for your credit rating as it shows you either can't live within your income or are bad at financial management

I didn't know this... I am in my overdraft every month. I had trouble getting a loan with my own bank but with competitors no problems. Maybe because they had this inside info.

Fruit_and_Nut_Case

richardc1983 wrote: »

[...] I have cut this card up yesterday [...]

Cutting it up is not sufficient to close the account. You need to tell the company if you want to close the account or it will still appear on your credit report.