Is a credit limit increase offer indicative of an improvement in credit rating?

tinley

Hi all,

I have £15k's worth of debt that I am slowly but surely getting to grips with. I used to bounce my credit card debts to new 0% interest deals once the previous had expired, but over the last 18/24 months I have been rejected for new cards, presumably as companies have been more careful about allocating credit. I was prepared to leave it a while before applying again, but in the last few weeks 2 of my card providers have offered me credit increases. I shall decline their offers, but does this indicate that this is a good time to apply for a new 0% interest card, with a decent likelihood of acceptance?

Any advice would be much appreciated.

zenshi

Was it one of those computer generated letters???

I have just started my own DMP and within 6 weeks I had a letter offering me 0% balance transfers on a card I have defaulted on and was now closed :eek:

Did make me laugh though!

tinley

Hi,

It was directly from the card company so I assume it was generated. Still, I've no reason to doubt it's a valid offer.

ValHaller

All it means is that your credit score with the company in question has gone up. There is no such thing as a universal credit score. Each lender has its own score for you.

tinley

I see - thanks for the reply. I was under the impression that there was a universal credit score - isn't that how new credit applications are measured?

Tixy

tinley wrote: »

I see - thanks for the reply. I was under the impression that there was a universal credit score - isn't that how new credit applications are measured?

No
There are 3 credit reference agencies which any potential lender can use, all of which will hold some information about you, that is facts such as your name, date of birth whether you are on the electoral roll and then usually some record of your past credit history (what credit agreements you have had, whether payments have been made on time, what balances you owe etc).

Any potential new lender will generally look at that information, any internal info they hold on you (e.g. from existing accounts) and the other information on your application (salary details etc) to calculate an internal score for you on that day and then decide whether or not to accept an application from you and at what rate they would be willing to lend to you.

You can buy credit scores from each of the 3 credit reference agencies, but these are only seen by you, and are only based on the information they know about you (which is far less than is on a credit application). And are not worth paying for.

Back to the credit increases you have been offered - are any lenders also offering you any promotional balance transfer / 0% deals? if so maybe you could shuffle some of your debt (whichever has the highest APR) to a lower rate?

tinley

No, I've had no 0% offers yet and am reluctant to apply in case I get declined (I last applied at the start of the year).

So I shouldn't take these credit increase offers as a sign that I would be more likely to be accepted for a new 0% card elsewhere?

Tixy

Chances are that your existing lender hasn't done a new credit check to see what your existing financial commitments are or how you are managing your credit agreements with other banks, more likely they have just looked at how you have managed the existing account with them.

It could be worth phoning up the existing account lender that has offered you an increased credit limit to ask if they have any balance transfer offers already on your open account, thats not a full credit search its just asking what they will already offer you, so if they say no you haven't lost anything.

ValHaller

tinley wrote: »

I see - thanks for the reply. I was under the impression that there was a universal credit score - isn't that how new credit applications are measured?

No, every lender calculates their own score. If you start doing things to improve your Experian so-called 'credit score', you may end up harming your prospects of a mortgage. Financial behaviour which enhances your 'credit score' is most likely to be behaviour which improves your rating for consumer credit. But it is the kind of behaviour which reduces your mortgage prospects.

For example, taking up credit cards you do not need, paying minimums each month rather than clearing balances.

tinley

Thanks to you both - very helpful replies which are much appreciated!

The_Boss

tinley wrote: »

I see - thanks for the reply. I was under the impression that there was a universal credit score - isn't that how new credit applications are measured?

*bangs head against wall in frustration*

What gave you that impression? Serious question.