How Do Unused Credit Cards Effect Credit Ratings?

CalumHeath

Hello,

Long-time visitor; first-time poster.

I have a good credit rating. I have one cashback credit card that I use for day-to-day purchases which is paid off every month and one 0% credit card which I only ever pay the minimum on and transfer when the 0% is up; this balance never gets added to (with the exception of handling fees to new accounts, of course) but I resent the idea of paying in full whilst ever I have 0% offers available.

I'm current using about 20% of my available credit. I have three other credit cards (five in total including the first two I mentioned) with available balances of £6,000, £6,300 and £6,400. These are all old credit cards that I've had for years which were originally taken out for their 0% offers, have been settled but have never closed the accounts.

My question is: how do these accounts effect my credit rating? They are never used and never will be. I appreciate old accounts are more susceptible to fraud: I keep a close eye on them as part of my financial management so that's not really an issue; and I understand completely that whilst I have these accounts it's highly unlikely I'll be able to take advantage of another 0% offer with the same company (which won't be an issue until November 2015 when my current 0% ends).

I worked at Experian briefly in 2004 and as I understood it, if you had a lot of available credit this was detrimental because of the opportunity to get into debt quick. It appears now that the more credit you have, but less you spend of that available credit, the better for your rating.

Please can anyone answer this query with links to sources of their answers?

Thanks in advance!

[Deleted User]

It's a balancing act. You want a lowish balance to limit ratio, but also to keep your total limits reasonable.

I would keep 2-3 of the cards. Ditch the ones that are unlikely to give future offers.

DigForVictory

Check them all for Card Payment protection first?! CPP etc

But then +1 for ditch as many as seem reasonable.

CalumHeath

Thanks for the prompt responses.

I'm all for cancelling the credit cards. I've been considering doing so for months but the reason I haven't is because for each credit card I cancel, the percentage of my available credit will decrease and my proportion of credit I've used relative to my total available credit will increase.

For example, if I got rid of the three cards I mentioned and just kept my cashback regular-use credit card and the credit card with the 0% on, my available credit will drop (which in itself isn't an issue) and the amount of credit I'll be using relative to what I have available will shoot up to about 70/80% which may give the impression I'm struggling.

As I understand, this is worse than my current status of about 20% even if it does appear excessive to have those cards with those available balances.

Again, I'm happy to be corrected.

thebritishbloke

I'd say keep them open until you can clear down the 0% card a bit, until your usage on that card is <40%. Then close down any unused ones.

CalumHeath

thebritishbloke wrote: »

I'd say keep them open until you can clear down the 0% card a bit, until your usage on that card is <40%. Then close down any unused ones.

Yeah this is what I was thinking; just interested in what other people knew about it. Think I'll just leave it as it is.

Thanks for everybody's input.

Thrugelmir

CalumHeath wrote: »

I'm all for cancelling the credit cards. I've been considering doing so for months but the reason I haven't is because for each credit card I cancel, the percentage of my available credit will decrease and my proportion of credit I've used relative to my total available credit will increase.

That's an irrelevant factor when a lender determines your suitability. They are far more interested in available credit, number of account accounts, whether account is minimum payment only, 0% interest accounts, trend of outstanding balance i.e. being rolled over etc.

All the factors combine to give the lender a fairly accurate profile of you (financially).

The_Boss

CalumHeath wrote: »

Hello,

Long-time visitor; first-time poster.

I have a good credit rating. I have one cashback credit card that I use for day-to-day purchases which is paid off every month and one 0% credit card which I only ever pay the minimum on and transfer when the 0% is up; this balance never gets added to (with the exception of handling fees to new accounts, of course) but I resent the idea of paying in full whilst ever I have 0% offers available.

I'm current using about 20% of my available credit. I have three other credit cards (five in total including the first two I mentioned) with available balances of £6,000, £6,300 and £6,400. These are all old credit cards that I've had for years which were originally taken out for their 0% offers, have been settled but have never closed the accounts.

My question is: how do these accounts effect my credit rating? They are never used and never will be. I appreciate old accounts are more susceptible to fraud: I keep a close eye on them as part of my financial management so that's not really an issue; and I understand completely that whilst I have these accounts it's highly unlikely I'll be able to take advantage of another 0% offer with the same company (which won't be an issue until November 2015 when my current 0% ends).

I worked at Experian briefly in 2004 and as I understood it, if you had a lot of available credit this was detrimental because of the opportunity to get into debt quick. It appears now that the more credit you have, but less you spend of that available credit, the better for your rating.

Please can anyone answer this query with links to sources of their answers?

Thanks in advance!

You don't have a credit rating, so zero effect on it. As others above have said though, some lenders will assess your credit applications depending on the amount of unused credit you have available and possibly score the application down if there is a lot, since this in theory could be run up with debts.

CalumHeath

Thrugelmir wrote: »

That's an irrelevant factor when a lender determines your suitability. They are far more interested in available credit, number of account accounts, whether account is minimum payment only, 0% interest accounts, trend of outstanding balance i.e. being rolled over etc.

I'm aware each lender calculates lending risk based on many factors, this wasn't my question.

My question was whether the specific factor of having more available credit was better or worse than having less available credit in the context of calculating creditworthiness, and so far it appears nobody knows, which in itself answers my question.

But thanks to those who got involved with the thread.

Thrugelmir

CalumHeath wrote: »

I'm aware each lender calculates lending risk based on many factors, this wasn't my question.

And my answer was.

That's an irrelevant factor when a lender determines your suitability.

If taken in isolation at a single point in time.