Unused Credit Card - does it affect Credit Ratings?

chrestomanci

Hi all,

My journey into CC foray started a couple of years ago when (naively) I thought I would be accepted for a Tesco CC off the get-go. No such luck! My bank manager helpfully advised me to get a Barclaycard Initial. Later, I was approved for a Halifax Clarity, which is my main credit card.

I tried to apply for the Tesco CC again (today), and I just got accepted. I anticipate I'll be switching use between the Halifax one (for going abroad) and this one (petrol, 0%, etc).

I plan on paying both off in full every month.

Is it worth keeping the Barclaycard Initial? I don't plan on using it now I have the two cards I needed - but not sure if keeping it open will affect my credit rating positively. Any advice would be greatly appreciated.


(Also, the Tesco CC says 0% on purchases. Am I right in thinking that this means that as long as I make my minimum payment every month, I won't be charged interest for the first x months? Not planning on doing this, but it would be good to know how this would affect my credit rating, if at all.)

Scarpacci

Yes, it does affect how banks would judge your credit worthiness. It can be a positive thing to have some available credit (or, more accurately, not be using all the credit you have) and it can be negative if lenders think you have too much credit.

It would depend on the limits on the cards and your income whether you would have too much credit if you keep it open. It will also depend how much credit you plan to use on the Tesco Card as to whether keeping the Barclaycard open would be beneficial. Having a long history with one card could also be beneficial.

Generally, with two credit cards, it's probably a good idea to keep it open. You have a spare card and your credit utilisation won't be too high. The limits on both combined probably won't be enough to be considered too much credit either.

chrestomanci wrote: »

(Also, the Tesco CC says 0% on purchases. Am I right in thinking that this means that as long as I make my minimum payment every month, I won't be charged interest for the first x months? Not planning on doing this, but it would be good to know how this would affect my credit rating, if at all.)

Yes, that would be how the 0% deal would work. Some say paying just the minimum is a negative factor, but that's easily got around by paying just slightly more. Credit reports also tend to reflect when promotional rates are in effect, so it may not even reflect negatively anyway.

Anthorn

Here's my take on it which is not entirely in disagreement with the preceding post: Cancelling the Barclaycard Initial will have the effect of lowering your available credit and may therefore increase your chances of getting credit limit increases on the two cards you intend to use. You don't intend to use the card anyway.

So, no, an unused credit card shouldn't affect your credit report but it could affect your ability to get more credit if lenders think you have maxed the credit you are good for.

CLAPTON

basically most of us really don't know

there are many on here with huge (total) credit limits (more than twice income) and never have trouble getting new CC with high credit limits.

However, if you really don't use it then you may want to consider closing it.

InsideInsurance

More of the reality rather than people not knowing is the fact that different lenders have different criteria

There generally are a number of considerations such as:

Total amount of credit available (if you max out what you've got could you still afford it)
Number of accounts (high number of lines of credit can be a concern)
Maximum single limit(s) (high limits suggest others think you're credit worthy)
Utilisation rate (Available -v- used, high rate is considered bad)

Obviously there are a lot of other considerations too but these are the most relevant to the question. The challenge is that if you close an account (generally considered a positive) then unless you have no outstanding balances at all then your utilisation rate goes up by the nature of having removed a limit.

Unless you have a high utilisation then I personally would want to remove the Initial card

chrestomanci

Well - to be honest, the other two cards have £1k+ as limits, and the Initial card has a £230 limit. I guess removing it wouldn't do any harm - I'm certainly not going to use it over the other two!

Thanks, everyone.

Anthorn

CLAPTON wrote: »

there are many on here with huge (total) credit limits (more than twice income) and never have trouble getting new CC with high credit limits.

Assuming of course they are telling the truth which I do not for one minute believe. Stretching the imagination are those who have bad debt who say they have 10 or more credit cards totalling a credit limit of thousands. Well, you know, I'm not saying they're telling porkies: I'll just say it's highly unlikely!