Credit Cards and available credit

vectrex

I had a balance of 18K on a 0% credit card. I've been paying it off as fast as I can and I'm down to 12.5K so far. Each month as I've been making a payment I've been reducing my credit limit on the card. So instead of having a card with an 18.5K limit and 12.5k balance.... I now have a 12.5k with a 12.5k balance.

Am I making a mistake? I read somewhere it was a good idea to do this as the less overall credit you have...the more likely you are to get more (if needed).

I've since read that having a balance considerably below you limit shows you are managing your credit!

The problem is I have 1 other card that has recently come out of its 0% phase and I need to apply for another 0% card.... and I don't want to get refused.

Should I just keep paying off the existing 0% and not reduce the available credit? or keep reducing the available credit after I pay off a chunk each month!

mrtoys

Yes, as the more credit you have available to yourself the more 'high risk' you are, so I think you are doing the right thing.

InsideInsurance

Companies look at utilsation rate and affordability. Ideally you want less than 50% of your total available credit being used however issuers will try and predict if you can afford everything if you were to max out all the cards including the one they are considering giving you.

Therefore there isnt a straight forward answer because you are balancing two conflicting considerations - high limit means a lower utilisation rate but also possibly more concern on affordability.

The other consideration is many lenders do like to see high limits from other lenders as it shows trust so someone with a 10k and a 8k limit will be seen in a better light than another person with 9 cards with 2k limit on each even if everything else was equal

[Deleted User]

I would certainly stop reducing your limit. There is a very real risk that lenders will take the view that you are using every penny of credit you can get your hands on.

Create a bit of space between your balance and your limit.

mrtoys

Deleted_User wrote: »

I would certainly stop reducing your limit. There is a very real risk that lenders will take the view that you are using every penny of credit you can get your hands on.

Create a bit of space between your balance and your limit.

Actually that's a very good point, also by reducing your limit you run the risk of them not allowing you to the have the previous limit again

vectrex

Thanks for the input... to be honest I don't want those limits again... I'm hoping to pay off both cards and then not bother with credit cards...(that's the idea anyway).

I will certainly stop reducing the limit as I don't think its helped really... if anything it may have made the situation worse...as I'm now near the limit on two cards! ...after doing a few of the "soft" searches it still looks like I wouldn't be able to transfer the balance on the card im now paying interest on to another card.... So I'm just going to have to pay some interest for a while :-( and try again in a few months!