Total available credit V amount of credit used - should I reduce credit limits?

andyslowrider

Hi,

I'm hoping you all might be able to give me some advice. I'm about two years away from needing to move house and want to maximise the chances of being able to get a new mortgage. My credit score is a bit worse for wear (currently showing 3/5 on Noddle) and I want some advice on how to manipulate my finances to increase my score as far as possible.

The credit limits on my various credit cards add up to around £22K and, unfortunately, I'm currently using around £20k of this (although thankfully I'm now in the position where I'm paying these off and can watch my balances slowly decrease).

I'm aware that of the many factors that contribute to my credit score, two are the total amount of credit available to me and the percentage of that credit that I'm using.

Should I decrease my credit limits on these cards as my balances decrease, so that the total amount of accessible credit decreases, or should I keep the limits where they are (and accept limit increases when offered?) so that the amount of credit used as a percentage of available credit decreases? Which will be more beneficial to my credit score?

Similarly, I'm trying to slowly reduce my overdraft (which gets heavily used each month) - should I decrease my overdraft limit each month or leave it where it is?

Any advice or thoughts would be gratefully received.

Thanks

Andy

thebritishbloke

Don't reduce your credit limits until you've managed to pay off at least a significant amount of the debt. If you're continually reducing them, it will look like the lender has been reducing them as often as they can, which in turn will not look good on your report.

Tixy

Which will be more beneficial to my credit score?

I assume you are asking which will likely be preferred by a potential lender? specifically in your case a mortgage lender?

If so then to a mortgage lender far more important that your level of credit is the level of debt. I would just focus on clearing the debt off as quickly as you can.
Ideally you want to be in a position where you are not using the overdraft for a few months before you apply for a remortgage.

Mortgage lenders often favour people having debt on a fixed term repayment i.e a loan rather than revolving credit accounts such as cards and overdrafts. But obviously would still then factor the repayments in to their affordability calculations.

andyslowrider

Many thanks for your replies - great advice, as always on these forums.