Impact of credit limits?

chasingfreedom

My husband has a couple of credit cards which have very low limits i.e. £200. We took them at a time when we were struggling but due to high credit commitments he was only given a low limit. We are just paying these little things off now.

My question is from a credit rating point of view is it better to pay them off and leave them with available credit showing or to cancel them all together. I wasn't sure if such low limits would have a negative impact.

The same for store cards, is it best to close completely or keep them open with available credit?

For larger credit limits on accounts are you better to ask them to lower the limit or leave it high? (For example, next have given us a 5k credit limit and our balance is only 700)

[Deleted User]

There's no easy answer. Some factors to consider include -

• it's always wise to have at least a couple of cards for emergencies
• don't have limits that are high compared to your income
• keep your balances as a low proportion of your limits
• higher limits can show prospective lenders that other lenders trust you
• too high limits can reduce any further credit a lender may be prepared to offer

Unless you're actively looking for new credit, then it needn't be an immediate concern.

chasingfreedom

Thanks for your reply. Its not that we are looking for credit now we're just trying to clean up our files after a rocky time and make sure that they are as good as they can be. We are looking at mortgages in a few years so just getting a head start.

LplateSaver

Limits show how much a lender trusts you so yeah low limits aren't great. My opinion:

I'd keep the longest card you have (good to show long history of handling finances).
Not change balances on high cards (using a low percentage of available credit is good)
Close low limit cards unless they offer something special like cashback etc.
Keep all (I have 2 cards some people like more) high balances cards for the moment until you need to apply for new credit then consider that decision again.
Use all cards you keep monthly (even if just charging a small amount) and pay in full to show that you're actively using credit and handling it responsibly.

Thrugelmir

Apply common sense. Keep what you need and use. As there's no upside to having more cards and/or credit available.

chasingfreedom

LplateSaver wrote: »

Limits show how much a lender trusts you so yeah low limits aren't great. My opinion:

I'd keep the longest card you have (good to show long history of handling finances).
Not change balances on high cards (using a low percentage of available credit is good)
Close low limit cards unless they offer something special like cashback etc.
Keep all (I have 2 cards some people like more) high balances cards for the moment until you need to apply for new credit then consider that decision again.
Use all cards you keep monthly (even if just charging a small amount) and pay in full to show that you're actively using credit and handling it responsibly.

Thank you for your advice