Does reducing unused credit limits affect my credit score?

coxy1072

Greetings one and all,

Not sure whether i have posted this in the right area but here goes anyway. I am currently £12,000 in debt which i am slowly chipping away at, at about £300 a month. My main question is about unused credit limits with catalogues and credit card companies, would it affect my credit rating in a negative way if i rang up said companies and asked for a reduction in my limit nearer to my current balance/s?

I have an account with Very, my credit limit has just been increased by another £500 to just under £6000, money that i wouldn't dream of spending because of my debt problem. I am however worried that if i leave it at its current level that the temptation would be too great or somebody might hack the account and order products leaving me with a huge debt. I am reducing the amount that i owe by £100 per month and intend to get rid eventually but would like some answers from anybody who is in a similar situation cheers :beer:

Moneymash

Yes, becuase I think the ratio is 80%, your outstanding balance should be no more than 80% of your credit limit any higher has a negative impact on your credit rating.

Therefore if you lower your credit limit to near your outstanding balance your rating will drop. It will look like you have almost maxed out your cards. What you want to reflect is a high credit limit and lower outstanding balance it will look like you are handling your finances better.

However if it is too much of a temptation to have high credit limits lower them and take the hit on your credit rating, this won't matter if you don't intend to apply for new credit.

Tixy

Its very difficult to say.

If applying for new credit then lenders generally look at your credit utilisation as well as your credit to income ratio.

Reducing your limits a lot will increase your % of credit used - and high is in general bad.

Leaving the limits as it will mean a higher figure when comparing debt+available credit to income.

So its a balancing act between the 2, with different lenders probably putting a different importance to each one.

Figures suggested by people on these forums vary. and nobody knows what lenders really think but in an ideal situation you would want less than 50% debt to total credit, and as low as possible debt+credit to income (and less than 50% if you are hoping for more credit).

coxy1072

Cheers posters for the replies, most of my credit cards are just below the maximum limit as i work slowly at reducing them. I think for the moment i will keep the limits as they are and reduce them periodically because too many footprints on my credit file will harm my ability to successfully apply for credit in the future. Cheers:beer: