Will lowering my credit card limit affect my credit rating?

ben_gi

I currently have 2 credit cards, one Tesco card (doubles as my Clubcard) which I use for groceries and petrol, and one 0% on purchases card which I use for larger things like holidays/cars and cycle as needed.

My Tesco card has a limit of £6,500, which is far more than I'm ever going to spend on groceries and petrol in a month! I'm conscious of having a fair bit of unnecessary, unused credit and was wondering if lowering the limit down to something more sensible, like £1,000, would be likely to affect my credit rating negatively (or positively)? I know that the information reported to the agencies includes the limit.

Thanks in advance.

Sorrell

I would like to know the answer to this as well. My partner just got a Virgin card and used the money transfer facility to get rid of his overdraft. He was given a limit of £5,000 which was far more than he needed or was comfortable with.

He asked them to lower it to £1,500 which they did reluctantly but they said it might affect his credit rating but they didn't say how. I reckon they're just scaremongering because they're obviously not going to make as much money out of him in the long run as they hope.

izools

As long as your balance remains under about 60% of the limit or so, then reducing it should not have a negative effect at all. Ideally balances should be circa one third of the limit.

All you need to be careful of is leaving the limit so low, that you're likely to have a high "Balance to limit" ratio. This should be avoided at all costs as it is a sign of debt stress and reduces credit worthiness

InsideInsurance

It will impact it but if it is positive or negative is not something that anyone else can say and one lender may think its good and another think it is bad. You also need to take it into consideration with any other credit agreements you have, outstanding balances and income

BugsyBrowne

InsideInsurance wrote: »

It will impact it but if it is positive or negative is not something that anyone else can say and one lender may think its good and another think it is bad. You also need to take it into consideration with any other credit agreements you have, outstanding balances and income

My thoughts exactly.

Anthorn

Potential lenders not only see your current balance and limit but also the history of them over the last six years. Some lenders might think that a lowered limit is the result of a lender thinking you're not as good a risk as before.

On the other hand, a lowering of your limit increases the new credit available to you.

I agree with the foregoing, it all depends on the criteria applied by a particular lender and one is not the same as another.