Reducing Unused Limits

Th1984

Hi all,

I am in the process of reducing some of my excessive cc limits that I simply do not need anymore. I was under the impression that generally lenders will not lend any more than 50% income so as I was approaching that point, if I reduced my available credit I would become less of a risk for 6 months to a years time for refinancing my Santander loan, which is a ludicrous 14.9%!!

However, virgin today when I called them to reduce my available limit from 15,900 to 6,000 (couldn't bring myself to get rid of all flexibility even though I don't intend to use it) they told me this could adversely affect my credit rating? I don't understand how, so I thought I would post up here to see if someone can explain this to me or if she was just trying to persuade me to keep the limit and dump 11k into my bank account.....

Cards
nationwide: current limit 7800, requested 3000 (car maintaince budgeting card)
Santander 123.: current 6000, requested 3000 ( cash back only, never exceeding 3k balance at any point)
Virgin: current 6000 down from 15900 (0% b.t.)

The idea being to bring my available, but unused credit lines down from near on 30k to a more reasonable 12k. am I right in thinking this will look better to potential lenders or am I doing completely the wrong thinG?

Money_Man

I guess they are referring to another lender searching your file and noting your limits have been reduced with other providers - they will not be informed that you phoned and reduced these limits yourself so possibly could be interpreted as a negative

Why do you feel the need to reduce the limits anyway?

Why don't you transfer the loan onto a credit card if the term is short enough?

Th1984

I had just assumed that as my total credit was nearing 48k, that if I reduced that 'total' credit by 16k then in 6-12 months time I can refinance the loan on more attractive terms.

I tried nationwide as they soft search and they quoted me 17.9% apr so obviously there was something they don't like at the moment, was just looking to improve things for the future.

The term is another 4y5m to go so not worth transferring to a cc as I couldn't pay off before the rate increased.

Money_Man

Yes probably higher rate as you are trying to refinance a reasonably large loan very short into the term, what was the loan for?

Difficult to comment without knowing your circumstances

Personally would have left the limits where they were, guess it depends on how much you can afford to pay back each month in terms of consolidating to a credit card but your Virgin limit or old limit would have enabled you to transfer it

Th1984

Hmm, the loan, unfortunately it has been many things in its extremely long lifetime, started off as a laptop, then a car, then consolidation, then another car, then finally fitting our house out with white goods from scratch. It started when I was 18 (8 years ago) and has never really been finished, just rolled into different agreements and pushed from pillar to post.. However I have since had my lbm and with the help of the kind people on the dfw board and am reducing it as I can!!

I only had 11k headroom on the virgin after transferring a balance which again had just been moved from 0% to 0% for years (think I drank and partied most of that a long time ago) so I couldn't have managed to pay the 18k within the 0% period.

we are trying to sustainably pay down our debt so cant go crazy with pverpayments (wife is sahm and we have 1 boy with another on the way) and I was just shooting for the cheapest rate that I could find, will wait another 12m until I try for cheaper.

Thanks for stopping by!

Money_Man

best of luck, sure you will be fine