Available credit / credit rating confusion

judip66

I have spent the last year trying to improve my credit rating, by paying off as much of my debt as possible, and, in respect of credit cards I have been reducing my available balance, to make sure I don't spend thing. I earn a good salary and am never late paying (DDs set up for everything) so was shocked when i signed up for Experian today to find out that my credit rating is only "fair". Having done some research I realise now that "available credit" is not based on what I earn and therefore can afford to pay but instead on what I have and the % of utilised credit (by reducing my available balances I am utilising 50% of my available credit) so I am now in a catch 22!
I can't increase my available balance because my rating is only "fair" and I can't improve my fair rating to good because I am utilising 50% of my balance.
Can anyone give me advice on how to improve this please?

Candyapple

The only thing you can do is continue making payments to clear the balances and once the balances are zero, close any accounts which you no longer require.

MEM62

Time will improve the situation. As you continue to pay down your outstanding debts the percentage of used to available credit will reduce.


Lenders will view this more favourably but whether it changes your credit 'rating' or not is of no consequence as this is a fictitious score made up by CRA's. Lenders do not see it and certainly do not use it.

judip66

Candyapple wrote: »

The only thing you can do is continue making payments to clear the balances and once the balances are zero, close any accounts which you no longer require.

But that is what i have been doing and the more i cancel stuff and reduce balances the WORSE my credit rating is getting - when i had 10k available balance on one of my cards and 3K outstanding, because I was only using something like 20 or 30% of my available credit my credit rating was good instead of fair!
If i ring that credit card company up and explain the situation would they increse my balance back to the 10K so i am not using so much of my available credit
(I feel so stupid because I thought that "available credit" was what I could afford to pay compared to what i have to pay! - who knew?!)

JKSandy

What's the reason you keep lowering the credit limit?

Just pay the debt off and don't worry about reducing the limit unless you have no self control and will use it again. They will possibly credit check you if you ask to increase it, so I wouldn't worry about increasing it back up.


Secondly stop worrying about the score. And if you're paying a membership fee to any CRA stop that also.

solentsusie

Personally I really wouldn't worry about the 'fair' and the 'good' with the CRA as their ratings are not seen when you apply for credit - I am sure you will be told this on numerous occasions throughout this post.

The great thing is that you are paying off your debts, and if you don't need 10K credit limits what does it matter?

Stop worrying about meaningless scores, pay your bills on time, keep your borrowing within reasonable and affordable levels for your income and be happy.

Thrugelmir

judip66 wrote: »

But that is what i have been doing and the more i cancel stuff and reduce balances the WORSE my credit rating is getting

The assumption being that the lender has reduced the credit limit not that the borrower would voluntarily request it.

Clear the cards then close them.

judip66

JKSandy wrote: »

What's the reason you keep lowering the credit limit?

Just pay the debt off and don't worry about reducing the limit unless you have no self control and will use it again. They will possibly credit check you if you ask to increase it, so I wouldn't worry about increasing it back up.


Secondly stop worrying about the score. And if you're paying a membership fee to any CRA stop that also.

I was reducing the credit limits because I (foolishly) thought that would increase my available credit (as I said - I thought it was about how much i could AFFORD to pay!, not how much i had talked banks etc into lending me already!)
And no - definitely not paying for CRA - just signed up for the freebe and will cancel prior to it becoming chargable