Credit card cancelling

adidas

I've had a look on the forum but didn't see anything that answered my question really. I wondered if anyone could please let me know if cancelling cards (especially a large number at the same time) will affect my mum's credit rating? I think she has a very good credit rating because she's profitable and hence has many cards. I'm trying to get her to cancel all the cards she doesn't use and sort out her debts. Do you have any advice about the length of time to cancel the cards or should I do it all at once?

Advice would be much appreciated

jonesMUFCforever

I think this might be a good idea.
Banks are able to see the potential debt available by adding up all the card limits so closing old ones is a good idea IMO.

wannabedebtfree_2

If you read some of the previous threads there are some issues surrounding this that have been discussed, I have read the following advice that makes sense and should be considered.

Lets say if your mom has 5 cards each with a £3k limit, giving her a total of £15k credit, and is say £8k in debt, she is only using 53% of her available credit, and therefore looks like a pretty good bet when it comes to other financial products, BUT, if she cancels 2 of them, leaving her with a £9k credit, she is now using 89% of her available credit making her look more of a risky customer.

Its crazy I know, but if you read back theres loads of posts about this, I know cos I asked the same question about a week ago and was given links to other threads, at first I couldn't find anything that actually helped, but after sitting and reading several threads, going through page after page I finally found something that clicked!

bowlhead99

I agree with you wannabedebtfree, theres a balance to be struck between:

- having a fewer credit relationships (allows good deals to be available to you as a 'new' customer, and to have lower total credit limits compared to your salary, so probably more attractive to new lenders) ; and

- not being too stretched in terms of what you have borrowed compared to the limits you have been given.

So maybe £10k of credit limits is OK if you have borrowed £5k, to keep your borrowings at a low ratio to the total limit, but £15k of limit would be an extravagance,and maybe a temptation. Lower it, by cancelling cards rather than asking for limit reductions. Look at what cards she has and what their terms are, and keep the best ones, keeping enough cards for some 'headroom' above current borrowings.

If you cancel every card that isn't maxed out, she'll be left with just one or two maxed out cards. If she has some emergency, and has no spare cash and nil spare credit, she is not well placed to go and get a new card at an attractive rate. It is way cheaper to have a card under your bed that you can spend £1000 on if you need to, than be visiting loan sharks for that emergency £1000. Furthermore, if she had 3 or 4 cards and wasn't using 2 of them, once in a while one of those cards will give her a special offer rate for a balance transfer.

My parents are quite cautious and their advice to me when growing up was certainly "once you have paid off that card, cut it up for goodness sake, you don't want to be borrowing, if you want something save up for it". But that is something of an old-school answer and assumes the person getting the advice really needs 'protecting from themselves'. If you can instead give the person an education on how to be responsilble and protect themselves - that's better.

If you have successfully educated your mum about reducing her debts and not spending money on things she doesn't need, the fact that she has 'spare' credit on unused cards locked away somewhere is not necessarily a bad thing, and if it serves to show that her day to day situation is not 'stretched', will not be a bad thing for her credit score.

Finally if you have looked at the whole situation and decided there are definitely some cards that can be cancelled, you are not using them and you would prefer not to have them - just do it, rather than trying to gradually cancel them over year!

adidas

Ah thank you very much wannabedebtfree! I've found your previous threads and had a look at them and links to pages you were sent Makes a lot more sense now and thanks for the explanation. There are quite a few which can be cancelled so we will be sorting that out and she can keep the good ones as well.

wimblewomble_2

hi everyone, (my first post)

havent had to post anything before, as there is so much knowledge to access easily.

I want to know how do you know that a card has been cancelled?
I have on my credit report, cards marked "Settled" in the "Current balance" column (experian), but am not sure whether that counts towards my "available credit".

I also know that some of my unused cards have a very old "last updated" date, but that still doesnt say for certain that the card is cancelled, as opposed to rarely-used.

so, what do I look for on my credit report that shows the card is definitely cancelled? (does it disappear from the list prehaps?)

thanks for any replies.

Moggles_2

Hi wimblewomble

I want to know how do you know that a card has been cancelled?
I have on my credit report, cards marked "Settled" in the "Current balance" column (experian), but am not sure whether that counts towards my "available credit".

I also know that some of my unused cards have a very old "last updated" date, but that still doesnt say for certain that the card is cancelled, as opposed to rarely-used.

so, what do I look for on my credit report that shows the card is definitely cancelled? (does it disappear from the list prehaps?)

Cards which have been closed down are marked "settled".

Settled accounts are kept on file for 6 years from the settlement date but do not count towards your available credit.

cepheus

It is not that clear how to cancel a card. I have various banks still sending me paperwork about previous cards even though I have long since asked them to fully close the account not suspend it. I expect they are reluctant to close accounts so as to discourage Tarting for the special offers.

Moggles_2

Originally Posted by cepheus
It is not that clear how to cancel a card. I have various banks still sending me paperwork about previous cards even though I have long since asked them to fully close the account not suspend it.

Even when the paperwork stops, you cannot assume the account has been closed, as some companies only send statements when there's a balance outstanding.

Best practice is to ask the lender to confirm closure in writing. If the promised confirmation letter does not arrive within a couple of weeks, ask why.

Finally, if your credit reports do not show the card(s) in question as settled, contact the lender(s) once again and ask them to make the necessary changes.

The whole process from the initial phone call can sometimes span a couple of months, so allow plenty of time.