Lowering Credit Limit - Could It Cause Future Problems?

RedSH

Hi,

Looking for some advice.

I'm thrilled that after years of my worrying about my H's ability to spend money he/we don't have without a second thought he has recently had his lightbulb moment - we would love to move and he found the perfect house only to find out we don't stand a chance until we have cleared all outstanding debt. This also includes a Northern Rock Together Mortgage shocker but thats a whole different story!

Anyhoo, he has 2 credit cards (I have none) one of which has nothing on it, we have managed to clear it. We reduced the credit limit from £6000 to £2000.
This is to reduce the temptation of spending money he doesn't have whilst still providing a back up should we need it for an emergency.

The other credit card, a Barclaycard, had a credit limit of £12500 and there was £11800 on it :eek: we are working towards paying this off as quickly as physically possible and it is already down to just over £10000.

Now...finally...I'm getting to my question:
We have been reducing the credit limit on this card as we pay it off when we get below the nearest £500. So currently the limit is down to £10500.
This is a great motivator for my H as he feels it shows the impact our hard work(savings) are making.
BUT having now read various threads on this board I'm worrying that this may have a negative effect on our future i.e. when the time comes to get a new mortgage/finally move.

The plan has been to pay off this card and get rid of it but is that a wise move? Should we be leaving the limit where it is or is it ok to reduce it as we go?

We have no intention of applying for new credit any time soon i.e. loans/new credit cards etc (pretty sure we'd never get a 0% CC to transfer the Barclaycard balance so not even going to try) so does it matter?

Many thanks in advance for your advice.

[Deleted User]

I would leave it as it is. You are incredibly high on usage to limit ratio and I think you need to clear a little headroom first.

At the moment, you permanently look as if you spend every penny of available credit.

sfax

Deleted_User wrote: »

I would leave it as it is. You are incredibly high on usage to limit ratio and I think you need to clear a little headroom first.

At the moment, you permanently look as if you spend every penny of available credit.

+1 do not reduce it for now. Utilisation of about 50% looks much better to lenders than 90%+.

RedSH

Ok, that does make sense - thank you!

So the next time we can reduce it without too much detrimental effect will be when we get down to £4000 and make the limit £8000?

Shame that seems like a long way off!

Thinking ahead...once we have managed to clear it completely would it be best to keep the card or is it ok to close the account?