Is too much available credit a bad thing?

Tiptoppex

I am looking at getting a mortgage in the next few months, so I have been closing down unused credit cards etc over the last year.

I've just checked my credit reports and it's showing I have around £16,500 available credit. However, nearly half of that amount is actually my business credit card, I'm self employed so it is in my name.

Will that amount of available credit go against me when applying for a mortgage?



Credit breakdown:
Halifax CC (Business) - £7200 limit - Paid in full when used
Halifax CC (Personal) - £3000 limit - £1000 balance (0% BT will be closed once period is finished)
MBNA CC - £2500 limit - Paid in full when used
Santander CC - £2500 - Paid in full when used

Very - £500 Limit - Paid in full when used
New Look - £300 limit - Paid in full when used
Argos - £500 limit - Paid in full when used

Halifax OD (Business) - £1000 - Never used but keep just incase

grumbler

Tiptoppex wrote: »

Will that amount of available credit go against me when applying for a mortgage?

In your situation - when the used credit is small - it will.

Generally, it can reduce used/available ratio that can be good if the used credit is big, but much lower than the income.

Tiptoppex

grumbler wrote: »

In your situation - when the used credit is small - it will.

Generally, it can reduce used/available ratio that can be good if the used credit is big, but much lower than the income.

Thanks, I thought it might do. I didn't realise I had that much, was rather surprised when it said it!

Think I'm going to have to try and see if I can reduce some of the limits.

I know the £7200 limit one is the biggest issue, will have to see what I can reduce that one to without causing any problems with business purchases.

The MBNA is used purely for fuel - so once ever couple of months. So can look at reducing that one by quite a bit and the Santander one is used purely for online, so that one can be reduced as well

:beer:

phona

Be careful reducing them. The change in limit will show on your credit file but will not say that you requested the reduction. Future lenders might assume your current lenders no longer trust you for some reason.

You say you use MBNA for fuel and Santander online. Is there a compelling reason for this? Couldn't you close one of those cards and use the other for both fuel and online transactions?

You don't say your income but if it's high enough that your available credit is <50% of your income, you could well be worrying about nothing; ie your available credit is fine. None of the limits are particularly high - even the 7.2k doesn't boggle the mind!

Butti

The banks are concerned about risk. The risk your Cc spending is too high in relation to your income, the risk you could suddenly decide to go on a spending spree. May be worth asking for advice from your bank before you start the process proper.

Paully232000

I would close down all the catalogues as do you really need them when you have a CC. I suppose you may use them when they have special deals, £20 off a spend etc.

Also, it would depend also on your income, if you said you earn (for eg) £100K/year then these limits dont seem so bad, but then again if you said you earn £20K, could be viewed differently.

Never had any experience of CC available having an impact on ability to get more credit, up to and including a mortgage. This was even when my available credit, including a charge card with a mystery limit, far exceeded my income.

InsideInsurance

Catalogues always used to be seen as sub prime lending so they'd be the first I'd look to get rid of.

Is the business card actually a company card or are you a sole trader and so it is actually yours but you just use it for business purposes?


Lenders will look at affordability when considering if to lend you money or not and so basically will ask themselves the question on if they think you could afford to keep up the payments if you maxed out every line of credit you have plus what they are considering to give you.

You could have £30k of available credit across multiple lines and that wouldnt cause any issues if you're on £600k salary but would be a significant problem if you are on a £40k salary

Paully232000

InsideInsurance wrote: »

Catalogues always used to be seen as sub prime lending so they'd be the first I'd look to get rid of.

Is the business card actually a company card or are you a sole trader and so it is actually yours but you just use it for business purposes?


Lenders will look at affordability when considering if to lend you money or not and so basically will ask themselves the question on if they think you could afford to keep up the payments if you maxed out every line of credit you have plus what they are considering to give you.

You could have £30k of available credit across multiple lines and that wouldnt cause any issues if you're on £600k salary but would be a significant problem if you are on a £40k salary

I am not sure that this is always true, as when i have applied for mortgages and additional CC accounts there is no way i would have got anything additional if they did this as no way i could have serviced min payments in addition to living expenses if i had maxed out. But i guess this is one of the considerations as well as looking at how well credit has been managed over the years.

InsideInsurance

Paully232000 wrote: »

I am not sure that this is always true, as when i have applied for mortgages and additional CC accounts there is no way i would have got anything additional if they did this as no way i could have serviced min payments in addition to living expenses if i had maxed out. But i guess this is one of the considerations as well as looking at how well credit has been managed over the years.

It is just one of the criteria they look at but with increasing focus on affordable debt its likely to carry more weight than it used to.

Tiptoppex

Hi all, thanks for your responses, will try and answer any queries...

Here goes!

My income can be quite variable, anywhere between 15k and 30k. Basically I had to take over the running of my mothers business when she died suddenly and everything is still a bit up in the air.

I am a sole trader, so the business card is linked to my business account, but it's all in my name.

In all honesty I absolutely hate using any form of card, I never use my debit card unless I really have to. I always try to pay for things with cash whenever possible. The MBNA card is the only one I know the pin number for, bar my debit cards so it's the one I use. The Santander one I originally had for a BT and when I cleared it it became my online purchases card.

I like to keep separate cards for online and instore.

Basically the use the cards get is very limited, but I prefer using them instead of my debit card. Usually there is only a balance of £100 on them if that. The business one has higher balance when used but isn't used as often.

The Very account was only set up because I had to when buying something - they had the best deal, not sure I will use it much again.

Argos was again making use of a offer.

New look, well that does get quite a bit of use

phona

You don't like using cards so it seems strange that you have 4 of the things!

I still don't get why you keep online transactions separate... Have you some security concerns? Since you say you want to get rid of some of your available credit, closing one of the Santander or MBNA cards is the most obvious solution.

Get rid of the Very and Argos accounts if you don't use them. No reason to close New Look though, if you do use it (although I've noticed they do have shops!)

Since you like to pay cash there is really no need to have so many cards. I'd close the Santander one and the personal Halifax one (once the BT ends), keep the MBNA one and maybe reduce the limit on the business Halifax one.