Credit Rating

decka

Hi,
Trying to improve my credit rating before applying for a mortgage - i've read conflicting advice - 1) you should keep old credit cards open with low balance utilisation, as that shows you can handle credit responsibly therefore improves your rating.

2) you should close old credit cards and reduce the credit limit available on those you leave open, as you only have a certain amount of 'Available Credit' and cards with high credit limit, even if you don't utilise it, will eat into your 'available credit'.

Which of these is right or is it different for each lender/credit agency? Is there such a thing as a universal amount of 'available credit' each person has?

Thanks

thebritishbloke

Having lots of accounts open is not a good thing, both for fraud, and for your "rating" (which by the way, doesn't exist. Ignore the score that the CRA's are trying to get you to pay for, lenders never see this and it means nothing. It's the data within your report that matters.

Just keep open the credit cards you actually use. So long as you're paying them in full every month, it doesn't really make a difference how much of your limit you're using (although some on here will say not to use more than 30-50% regardless).

Thrugelmir

decka wrote: »

as that shows you can handle credit responsibly therefore improves your rating.

Most peoples problems start when their income drops. Using credit responsibly is for the right reasons, i.e. major purchases. Not churning day to day expenditure through a credit card.

GingerBob_3

Thrugelmir wrote: »

Most peoples problems start when their income drops. Using credit responsibly is for the right reasons, i.e. major purchases. Not churning day to day expenditure through a credit card.

Well, unless you want the cash-back. I churn as much of my day-to-day spending as possible through my AMEX Barclaycard at 1% cash-back.

Thrugelmir

GingerBob wrote: »

Well, unless you want the cash-back. I churn as much of my day-to-day spending as possible through my AMEX Barclaycard at 1% cash-back.

That's a different matter.

captain747

I'd get rid of the dormant cards.. They make you less creditworthy esp for large credit applications.

Yes, in theory having a couple of credit cards that you pay off regularly, and on time work in your favour building up your credit score, but having a multitude of cards just sitting there collecting dust (with high potential borrowing) negates any positive credit scoring.. This would work against you.