closing CC - effect on rating?

lics

I have 4 credit cards and I'm considering closing one (Tesco 0% when the promotional rate expires). What's the effect of closing a credit card on your credit rating?

I have to be careful not to do anything damaging as my mortgage fixed rate is nearing its end and I want to have a perfect* rating so that I don't jeopardize my access to good mortgage deals. Thanks!

*no missed payments, no defaults, on electoral roll, stable job, low credit utilisation, no recent applications, so all green otherwise

YorkshireBoy

lics wrote: »

What's the effect of closing a credit card on your credit rating?

Your available credit will reduce...positive.

If you have debt on the other 3 cards your credit utilisation will increase...negative.

The extent of each of the above will depend on your income and other financial circumstances.

In short, who knows!

lics

I only have a balance on that Tesco credit card that I intend to close (will clear the balance in full before closing it). So theoretically the effect will be minimal or even slightly positive?

YorkshireBoy

lics wrote: »

So theoretically the effect will be minimal or even slightly positive?

I'd go with positive...unless the limits on the other 3 cards are VERY low in relation to Tesco.

Hazzinho

Closing accounts when you're done with them is good practice. The ratio lenders are most concerned about is debt to salary ratio, if your debt is less than 50% of your annual salary you're in a good place. I only ever keep one card jumping from one 0% card to another and closing. You just need to show you can manage credit.

lics

limits
£2000 bank overdraft
£2000 barclaycard simplicity
£5800 mbna platinum (not used at all, but oldest card and highest APR)
£500 halifax clarity (used only when traveling, they lowered my limit for non-usage)
£3500 tesco 0% (main spending card for now, but 0% rate expires)

planning to use the barclaycard as my main spending card, so perhaps I should lower the MBNA limit as well? thanks

lics

Hazzinho wrote: »

The ratio lenders are most concerned about is debt to salary ratio, if your debt is less than 50% of your annual salary you're in a good place.

What's included the debt? I won't have any CC debt once I close the Tesco card and I don't have any loans except for a (very high) mortgage.

[Deleted User]

lics wrote: »

I have 4 credit cards and I'm considering closing one (Tesco 0% when the promotional rate expires). What's the effect of closing a credit card on your credit rating?

I have to be careful not to do anything damaging as my mortgage fixed rate is nearing its end and I want to have a perfect* rating so that I don't jeopardize my access to good mortgage deals. Thanks!

*no missed payments, no defaults, on electoral roll, stable job, low credit utilisation, no recent applications, so all green otherwise

People have the tendency to over-analyse stuff to do with credit reports with some posts going on and on about the slightest details of what you should and shouldn't do.

This, in my humble opinion, is very generally a load of !!!!!!!! received knowledge that has been peddled around for years and has now become 'fact' when really, nobody knows how a particular lender will view things.

If you are using your credit responsibly, not struggling with repayments and aren't going too mad with applications, then I think you'll be fine.

Maestro.

I agree - some people on here seem to think that there's a magic formula machine which guarantees you credit - dont apply more than once in six months, don't spend more than half your credit limit, pay in full, don't pay in full... The list is endless and I myself have been given conflicting (okay, bad) advice in the past.

PaulW922

Quite often bank overdraft facilities are not shown on credit reports - it depends on the bank.

I agree with other posters that you can get carried away here, but having said that - older credit accounts are better than newer ones, so all other things being equal, I would keep the MBNA card. I would use the Tesco card for spending so I could get the Clubcard points, and dump the others (definitely that Halifax one with the £500 limit).

Reducing your overall available credit will have a positive effect on your credit file, provided you are not using your other cards to the max (as has been mentioned above).

When you apply for a mortgage the lender will take a much closer look at your file and is less likely to rely on automated scoring alone. For that reason I doubt the number of cards you hold will have much of a bearing on your mortgage application - it is the level of actual debt you are servicing that the mortgage company will be interested in.

If you stick with your existing mortgage lender they may not even do a credit check when switching deals (mine didn't last time I signed up to a new deal)

YorkshireBoy

PaulW922 wrote: »

and dump the others (definitely that Halifax one with the £500 limit).

Even though it has no overseas loading?

A £500 foreign spend will save around £15 compared with using another card or buying here first from a bureau de change. And no cash advance fee should an emergency ever arise.