Transfer to 0% or normal rate on existing card

Summ14

Wonder if you can help. If I transfer balance from 1 card to an existing card either on their current rate or 0% if offered and they increase my limit for this would they do a credit check?

Just looking to reduce available credit before looking into a remortgage and just wanted to know what good or bad effect it would have.

Thank you

YoungTrafford

As far as I know, they can't do a credit check without you applying for more credit. Assuming that I'm right, and others here have more experience of these things, the only way an existing credit card company will perform a credit check is if you apply for a limit increase.

All your existing creditors do, however, have access to your credit feed... So they do know about what's happening on accounts you have with others.

The difference is subtle, but if they offer an increase to you it is usually a month or so in advance and is qualified by words such as "if your circumstances don't change, we will increase your limit to xxxx". In which case, if you don't decline the increase, they will check your feed before actually giving it to you, so a new default would affect their decision, whereas other things on your feed such as a new credit account would probably not. This last bit would also be an assumption as you have their trust, and a new credit card application would weigh less than their knowledge of you as a good customer.

If you apply for an increase, however, they may see a new application with others followed by them as an indicator that your circumstances may be changing for the worse in much the same way as if you were new to them and had recently applied for several lines of credit.

This means that your provider offering you an increase looks good on credit reports as all a new lender sees is an increased limit from another lender, showing that the other lender trusts you.

I am relatively new to the credit game, and though almost 40 have only ever had mobile phone contracts and overdraft limits appear on my file. I decided to get a couple of cards so that I had both visa and MasterCard. I had a visa for a few months before my provider offered me an "if your circumstances don't change" offer of increased limit... Just after I'd applied for my MasterCard and so was worried that the new card would be seen as a change in circumstances... It didn't and I recieved my master card a few days before my visa limit was increased.

Hope this helps, or at least others can correct any wrong assumptions that I have made.

Martyn14

Hi Summ

I've heard the only potential problem with having a very low credit limit, would be if whatever balance you have is closer to your limit than to zero, then you may be classed as 'credit limit dependent' by a credit reference agency. If your balance is usually closer to zero than it is to the limit, then great.

So for example, if you get your credit limit reduced to as much as possible, which is usually around 500, let's say your average monthly balance is 350, as that 350 takes up the larger part of the 500 limit, it tells a story that you essentially need whatever credit you have been issued with. Spin it round and lets say your credit limit is 1000, and your average monthly balance is again 350, it tells the story you don't actually need all of your credit, or even go close to hitting it.

The other side to this is if you have a huge credit limit, even if your balance is usually very small, then this will be classed as a 'risk' as you have a huge amount of credit at blow at any given time.

Then again if your credit limit is low, generally you won't be classed as much as a risk.

Confusing right?
But as Martin Lewis said, credit scoring is not universal, different institutes look at you differently from the last one.

Hopefully this is insightful in some way,

And yes, like YoungTrafford, if there is anyone that works within a credit reference agency or has a greater knowledge within the field, please fill us in.

Summ14

Thanks guys blimey it is a confusing game lol

I have £7500 on cards with around £2500 available and £900 on catalogue with £5000 ish available.

Looking to remortgage from £130,000 to £150,000 witha house value of £200,000 with a dual income of £52,000

Just wondering if I have too much credit available to me or too much owing and have to make some changes

YorkshireBoy

Summ14 wrote: »

Just wondering if I have too much credit available to me or too much owing and have to make some changes

No-one here will be able to even hazard a guess to help you without knowing the 'dual income' split, ie 50-50 or £10K for you and £42K for your spouse?

Summ14

Ah sorry, mine is £17,500

YorkshireBoy

Summ14 wrote: »

Ah sorry, mine is £17,500

So you've around £16K of available credit and you're using £8.5K of it?...and that's before the mortgage (and any other commitments).

Lenders work to some key ratios:

Available credit to income (yours is over 90%)
Used credit to income (yours is around 50%)
Used credit to available credit (yours is over 50%)

Some lenders may feel these are too high already, and lowering available credit may be a bad move from a credit utilisation viewpoint.