Reducing credit limit to lower credit rating

Junglydaz

Hi all

I recently contacted my credit card to reduce the credit limit as i was led to believe that this would increase my credit score (less available credit to me etc.).

However, the guy on the phone told me that reducing the limit could actually harm my credit score, as any company looking at it would see that I had plenty of options for lending if i fell short.

What is the correct answer, please?!

Cheers

grumbler

If your (total credit available)/income ratio is pretty low, then the guy was right.
Another criterion is (used credit)/(available credit) that doesn't have to be very high.

[Deleted User]

The correct answers is - it depends.

If your debt to credit ratio goes too high, then it could worsen your rating.

However, having less available credit could also help as you wouldn't look as if you have access to lots of/too much credit.

What are your debts. limits and income?

InsideInsurance

Add to the above that lenders are interested in what others are giving you. Generally the higher other limits are the more comfortable they are as long as they believe the debt would still be manageable if you maxed out all of your existing lines of credit.

Generally therefore it is better to have a couple of high limits than lots of low limits even if the total adds up to the same.


Above all of this is the fact that all lenders have their own criteria and preferences and so there is no single right answer as what HSBC loves American Express may dislike

thenudeone

Scenario A.
Salary £20k
Total Credit limits £15k.
Total Credit outstanding £5k
Reducing your credit limits will probably improve your rating

Scenario B
Salary £20k
Total Credit limits £6k.
Total Credit outstanding £5k
Reducing your credit limits will probably worsen your rating

But each lender uses different criteria and is looking for different types of customers, so ... "it depends" was probably the best answer!