Should I lower my credit limit?

cherryblossomzel

Hi all. Hough I am an avid reader of the MSE forums, I do not post much, so please be gentle with me. I have a question about credit scoring.

I am going to be buying a new car soon (before end of Feb), for which I will need about £3,500 - £4,500 credit. My credit rating is good, never missed any payments etc. However, I do have three credit cards at the moment: Santander (Zero balance, £1000 limit), Barclaycard (Zero balance, £800 limit) and Lloyds (Approximately £950 balance, £15,000 limit). I do not use the Barclaycard at all, in fact have asked them several times to close the account but they can’t seem to get their act together. The Santander card hasn’t been used for purchases ever, only a balance transfer (with minimum payments as I had a 0% interest rate) which I then transferred to Lloyds in October (currently with minimum payments as 0% interest). In addition I have a personal loan with Barclays of about £600. So in total I owe about £1,500 with £16,800 available limit. My income is a tad over £30,000.

So here’s my question: assuming I can actually get that stupid Barclaycard closed (I definitely do not want it), should I consider lowering the limit on the Lloyds card? The most I have ever borrowed on it was about £1,900 and I paid that off in about 4 months. I have had this limit for at least 8 years. I have no intention of ever borrowing £15,000 on a credit card. Is this high limit scuppering my chances of credit? And if I reduce it now, does it take time for such a reduction to positively affect your credit score with lenders?

londonTiger

yeah I tried to close a barclaycard once and their retentions person just kept trying to get me to keep the card, offering new balance transfer deals and what not.

I had to insist over and over again. Eventually I got irritated and said "look I have important things to get on with, I'm not going to discuss this with you any more, please cancel my card" and they did.

If you're not used a card- then cancel it. It uses up credit entitlement amount and will impinge you if you try to get more credit. After cancelling it takes about another month for that entry to update as being a closed account. So it's worth cancelling if you want to get a care [on finance?] soon.

londonTiger

If i was in your shoes I would reduce the 15K limit to a realistic level.

cherryblossomzel

It does seem the sensible thing to do, though I believe it won't show up on my credit record beofre I have to buy the car, so I think it actually wn't help me immediately.

That'll teach me to leave things to the last minute

CLAPTON

best not to waked the dead

Rosco32

I agree I would cancel the Barclaycard but do it by sending them a secure message from their website if you have access to your account online and they should close it. If it was me I would probably reduce the Lloyds limit to £7k or £8k. You could even close the Santander account too. That would leave you with the loan and the Lloyds card with a £950 balance and if you reduce the limit approx. £6k to £7k of available credit. If you are also in a position to pay off your loan before you take out another that should help, unless you intend on applying with Barclays again then you should be ok.

eilidh_s

Would it be worth using the Lloyds card to buy your car rather than take out another loan?

Rosco32

I wouldn't use a credit card to buy a car as the APR is likely to be higher than a loan would be.

cherryblossomzel

eilidh_s wrote: »

Would it be worth using the Lloyds card to buy your car rather than take out another loan?

It would not be my first choice. The balance on the LLoyds card is a balance transfer that is currently on 0% interest until the end of the year. Purchases are not 0%, so will cost me a pretty penny. Though if it all goes belly-up and I can't find finance elsewhere that is an option which I could then try and mitigate later on with other balance transfers etc. Last resort though.

I'd prefer not to close the Santander card for that reason too. For the moment the LLoyds card will only have the 0% balance transfer and Santander will be used for any other cc purchases I might need to make in the next year. I do intend to put part of the money for the car on this card (only a few hundred pounds) to get whatever protection I can get under section 75.

Rosco32

Fair enough, the Santander card doesn't have a huge credit limit anyway does it, so you are probably right to keep it over, don't listen to me, I'm too cautious sometimes ��

Mong-Raa

Sorry to hi-jack a thread, but this is still quite recent and I don't want to unnecessarily start new threads on a similar topic.

Here's my situation. I got an MBNA credit card a couple of months ago to get me out of a hole. They gave me £2,900 by way of a credit limit. I also have a Barclaycard with just a £50 limit for emergencies and an overdraft limit of £100 (which I am not currently using at all).

The £2,900 credit card is now paid off completely - it was just to get me out of a temporary tricky spot until I got my December wages / Christmas bonus. I called them up to reduce it right down to £400 and the chap warned me there's a chance that it will shop up negatively on my credit file if I do that. So I opted against it until I had gathered more information.

Now, I wanted to reduce the limit as I never needed £3k, I only needed a few hundred quid. I can't see me ever needing thousands of pounds from a credit card and I understood that reducing the limit and/or closing unused credit cards was a good thing to do? But it is it really worth the risk of a blot on my copybook?

The back story to all of this is that I have a gambling problem. In the past, despite being a student, that Barclaycard had a limit of £3,000. I got myself into trouble a long time ago and it took a while to pay it all off. As soon as I had cleared my debts, I closed all accounts except for that one, where I reduced it to just £50 (in case of emergency, you know?).

The reason I obtained another card recently, was that I had a big relapse and got into a bit of a hole. Now I'm back out of said hole, I don't like the idea of having access to almost £3,000 that I could potentially lose gambling in future. But as I said, it has taken me a long time to sort my credit limit out and I don't want to mess up any of my hard work by adding black marks to my credit score, which could apparently happen if I reduce the limit.

I am considering buying property for the first time at some point in the next 18 months, hence my caution.

Any advice would be appreciated.