Credit limit advice please

distinctd

I just signed up for my first credit card because I was told that having one can help with credit rating and I want to get my first mortgage soon.

They've given me what I'd consider to be a really high credit limit, one that's much more than I'd ever need, could the be bad for my credit rating? Should I have asked for a lower limit? It might not be too late, I have to sign some forms that they'll send me to finalise it.

My intention is to pay off anything on the card immediately, I don't like the concept of credit, I'm only doing this to build a rating as I've never had credit of any kind in the past. I generally don't buy things and try to use cash as much as possible if I do, I'm going to struggle to spend money on the card, I don't need a high limit especially if it will damage my credit rating.

BugsyBrowne

What card compamy was it and what limit did you get?

Paul_01

BugsyBrowne wrote: »

What card compamy was it and what limit did you get?

Doesn't really matter, does it?

The only way a higher limit can be 'bad' in terms of future credit is if it means your available credit to income ratio is high i.e. credit companies don't want you to be able to get in more debt than your income should 'allow' There are of course differing views on what this ration should be.

Personally, I doubt it will cause you any issue with regard to your mortgage application. I wouldn't be applying for more credit for now though.

distinctd

Lloyds, who I have a current and savings account with, it was for their Avios Duo card, the limit was around £4k

distinctd

Paul_01 wrote: »

Doesn't really matter, does it?

The only way a higher limit can be 'bad' in terms of future credit is if it means your available credit to income ratio is high i.e. credit companies don't want you to be able to get in more debt than your income should 'allow' There are of course differing views on what this ration should be.

Personally, I doubt it will cause you any issue with regard to your mortgage application. I wouldn't be applying for more credit for now though.

Isn't there an overall pool of how much credit I can have from people at any time? Or did I interpret it wrong? They way I thought it worked was, I now have £4k credit from them, so that's £4k less in the pool for credit I can have from anyone, such as for a mortgage.

Paul_01

distinctd wrote: »

Isn't there an overall pool of how much credit I can have from people at any time? Or did I interpret it wrong? They way I thought it worked was, I now have £4k credit from them, so that's £4k less in the pool for credit I can have from anyone, such as for a mortgage.

It's not as simple as that.

Your income is the key factor, specifically how much access to credit you have in relation to your income.

But......there is no hard and fast rule on this, lenders will interpret your situation differently which is why people can be accepted by one lender and declined by another.

It will be much more important to run the credit card account well, no late payments, no cash advances is probably wise too.

I really wouldn't worry about a credit card that you'll be clearing in full each month as having a negative impact on your mortgage application. You'll be fine.

distinctd

Thanks for the advice, I suppose it would do more damage to change anything at this stage anyway? As I've read that lots of applications damages the rating?

One more thing, since I don't actually need the card for anything other than actually having a credit history from the point of view of the credit rating, is it advisable to get rid of the card before applying for the mortgage or to get rid after being accepted for a mortgage? The card is just an extra hassle to me that I'd rather be rid of as soon as possible.

Paul_01

There's no problem in getting rid whenever you want to. No issue with keeping it and simply not using it though.

Mozette

If you want to build your credit rating, then use the card to buy stuff you would buy anyway and pay it off in full when you get your statement (in my opinion setting up a direct debit for the full amount is best). Showing that you can handle credit and not abuse it will improve your credit rating, rather than never having any form of credit, which will tell potential lenders nothing.

It depends what your salary is, but I have available credit of 120% of my gross salary, but I have years of handling it responsibly, never missing a payment, never going over any limit, and never getting anywhere near my available credit. Hence I had no problem getting another credit card a week or so ago.

pooch

distinctd wrote: »

Lloyds, who I have a current and savings account with, it was for their Avios Duo card, the limit was around £4k

That is not a really high credit limit imho.