Should I lower my credit limit?

iAMaLONDONER

Mong-Raa wrote: »

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.

Surely the effect of a reduced limit on your credit file won't affect you much if you have no need to apply for more credit....

Ant.Evs

Could you not give the card to a family member for use in cases of emergency? obviously destroying any copies of account details that you could use on online casino's etc.

Personally i would do that if i could.

P.S well done fighting the gambling addiction! keep it up :-)

Mong-Raa

iAMaLONDONER wrote: »

Surely the effect of a reduced limit on your credit file won't affect you much if you have no need to apply for more credit....

As I said above...

Mong-Raa wrote: »

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

Mong-Raa

Ant.Evs wrote: »

Could you not give the card to a family member for use in cases of emergency?

Well yes I could, but I was under the impression that it was generally a good idea to reduce/close unused credit?

cherryblossomzel

I do worry a bit that if my limit is lowered future lenders might see that and think either that the bank lowered my limit because they didn't think I could handle it, or that I had it lowered myself because I couldn't handle it, neither of which would be a good thing.

However, there is a website for the UK card association that says that lenders will not discriminate against you if you lower your limit. I suspect that I can't post links, but is says:

"Myth: If I reject a limit increase, this will count against me and damage my credit rating

Reality: No, it won’t. The industry has committed to not treating customers any differently because they have exercised their right to reject any increases. In cases where the increased limit has been rejected, the existing credit limit will continue to be reported to credit reference agencies. This is also the case if customers choose to lower their limit."


From the reading I've done around the subject, one thing that lenders look at is you credit utilisation rate. So if you have available credit of £3000, but you only use £100, that's a good thing. Having a limit of £100 but uisng £75 is bad. I read somewhere that you should aim to keep your credit utilisation rate to less than 30%, but I'm no expert.

I might agree with the poster above: can you give the card to a family member who knows you have this problem and will ask all the right questions if you do go to them asking for the card?

Mong-Raa

People are focusing too much on the gambling bit here. Forget about that, I only mentioned it because I figured people would ask why I took out a new card when I already had one, or how did I get £2,900 with only £50 on my other card, or why do I need to reduce it or whatever.

Yes I can give my card away, but I want to make sure I'm doing the right thing by my credit limit. I am soon going to be looking into mortgages and I want everything to be hunky dory. I understood that reducing the credit limit was for the best, but here the credit card company themselves warned me that it might reflect negatively.

Surely they aren't just trying to scare me into maintaining the limit?