Optimum debt to credit limit ratio?

InsideInsurance

opinions4u wrote: »

Nil, surely?

Not necessarily, some would/ could argue if all your debts are always paid off in full then you will not be a very profitable customer to them and therefore potentially not the best use of their capital.

The ideal credit card customer really is one that pays interest every month as thats where the card issuers make the biggest profit, and ideally from a fairly high balance, but these are too high risk for most underwriters to take on as a new customer it then is suggesting financial difficulty.

You then potentially see a split on what a loan -v- credit card because the former has guaranteed interest where as the later requires the customer to carry a balance.

For a loan an underwriter probably does want the lowest possible ratio.

For a credit card however some would suggest that something in the 30-60% range is actually optimum rather than 0%

opinions4u

InsideInsurance wrote: »

Not necessarily, some would/ could argue if all your debts are always paid off in full then you will not be a very profitable customer to them and therefore potentially not the best use of their capital.

But most don't decline mainstream full payers. Around 50% of credit cards are cleared in full each month.

For a credit card however some would suggest that something in the 30-60% range is actually optimum rather than 0%

I don't get the desire of so many to carry (interest charging) debt. Or even to pay 3% every few months to renew interest free debt.

InsideInsurance

opinions4u wrote: »

I don't get the desire of so many to carry (interest charging) debt.

We are talking about the optimum from the point of view of an underwriter not the card holder

opinions4u

InsideInsurance wrote: »

We are talking about the optimum from the point of view of an underwriter not the card holder

Oh well, as that will differ from lender to lender there's no obvious answer.

But most of the mainstream card issuers are more than happy to take on customers who clear in full every month. So for that segment of the market the optimum is, as I suggested, nil.

aimzrabbit

well ...... i had 5 cards with about 10k available and about 8k on cards and a default i have paid everthing off and closed all but my £500 santander 123 credit card i am now spotless i did the nationwide soft search last week came back with 3800 and 15.9

my wife who is 28 has had loans 2 credit cards maxed few years ago . paid off has never missed a payment on anything in her life i mean she is squeeky bumshe has 4k available on cards but zero balance and a halifax loan with 2 years left

she came back with 2800 and 15.9 on the nationwide so technically i now have better credit rating than her

sfax

opinions4u wrote: »

Oh well, as that will differ from lender to lender there's no obvious answer.

But most of the mainstream card issuers are more than happy to take on customers who clear in full every month. So for that segment of the market the optimum is, as I suggested, nil.

You don't have nil if you have a card that you pay off in full every month. You have whatever was on your last statement. It's never nil unless you spent nothing that month after paying it off the month before.

sfax

opinions4u wrote: »

Or even to pay 3% every few months to renew interest free debt.

2.8% every 22 months as an equivalent APR is much better than any loan APR you'll get on the market. People (like me) use balance transfers as a much cheaper alternative to a short term loan. Saves £1,000s in interest if managed correctly

Cell

A lot of the American sites suggest 35% is optimal, but I guess their market is different to ours.

Certainly my experience is that it can be much higher than that.

It depends on your behaviour, your payment record and stability as much as anything.

Different strokes for different lenders I guess.

Logic suggests that as you rise above 50% it gets progressively harder to get a decent card.