Credit Card cancellations and Credit Rating

parabox

Hi all

Apologies if this is posted in the wrong place.

I've had some credit card debt for a couple of years now to try and boost my credit rating. Just as I've finished paying it off they have increased my limit to £1000. I don't ever intend on using this card again as I have another with a better interest rate.

My query is if I were to cancel this card, how would that affect my credit rating? People have told me conflicting information about this in the past so I was hoping for a bit of clarification.

Thanks in advance,
Ian.

[Deleted User]

It's always worth having at least two cards. And assuming the combined limits aren't ridiculous (which is unlikely, given one is only £1k), I would keep them both.

[Deleted User]

parabox wrote: »

I've had some credit card debt for a couple of years now to try and boost my credit rating.

This just struck me - you're not deliberately carrying debts in the belief it will improve your credit rating, are you?

parabox

I made a post on here a while ago about a Mortgage I was declined for. I was told that it would increase my credit rating.

I have the money in savings to just pay them off.

[Deleted User]

You may have misinterpreted the advice. Using a card regularly is good - but it should be paid off in full each month to avoid interest. It shoows you can manage your finances well.

Paying interest doesn't serve any purpose. Hopefully it didn't cost you too much.

parabox

Infact, it wasnt a post I made on here. Reading my history it was actually the Mortgage broker that told me paying off your card in full made no difference to my rating. I was paying off my cards in full for a good 3 years before she told me that.

It hasn't cost me a lot, I didn't borrow too much because I was so angry with how I was told the system worked. I guess she was wrong

gglaze

There is a competing theory that says some card companies would like to see that you can accrue some outstanding debt balance, but still be able to pay it off after a while. This can show that you can manage real debt (as opposed to just using a card as a "monthly spending" card); and it can also show that you can be a more "profitable" customer for the card companies, because they can make some interest off of you. For example, on some of my cards I try to leave a very small amount (like £1 or £10) every once in a while (but not all the time). Yes, it costs me a little bit of interest. But it might be worth it, if the theory is correct. In any case, I'd avoid running huge balances, if I had the money in savings to pay them right off - that surely won't help anything.

In the end, every lender will interpret your credit report in their own way, so there is probably not one single answer. If your main goal is to get a mortgage, then it may make more sense to go ahead and always fully pay off. If your goal is to get a high-interest rewards card for example, they might prefer to see that you can be a profitable customer, while still having relatively high chance of paying them back in the longrun.