Use existing credit or get more?

M_Haz

Hi guys, so I have a predicament and not sure how to proceed.

I need to get buy some equipment to start a new side business using a credit card, which I'm hoping to pay off from the revenue from the new business in the next 6-12 months.

I currently have an income of £46500, total credit card debt of £6744 and a total credit limit of £20000 across three credit cards, which gives me a utilisation rate of around 33%, which is higher than the 25% I've heard recommended.

The three cards I have are the Santander Zero card (for spending abroad only), the British Airways Amex Premium Plus card (for everyday spending, and I always pay it off) and a Barclays 0% balance transfer card.

On the Barclays, I used the initial balance transfer offer to transfer £5500 of balance from a 0% spending card. I have a limit of £10400 on the Barclaycard. I've now just received another good 0% balance transfer offer from Barclays with a low fee of 1.9% until April 2016.

I want to buy the equipment on the Amex (to get the Avios points) and then transfer to a 0% balance transfer card. The question is: Should I transfer to the Barclaycard and use up most of my limit on that card (and increase my overall utilisation rate), or would I be better applying for a new, additional balance transfer card (I'm keen on the Sainsbury's one) in order to increase my overall credit limit and reduce my utilisation rate?

I'm thinking of buying a property later this year, so I want to keep my credit score in good shape in order to get a mortgage.

Thanks so much!

mwarby

Mortgage wise they'll look at utilisation, but also what if you go nuts and max your cards out. I'd think they'd be more worried by total available credit than 7% debt to limit difference.

M_Haz

The thing is, it'll be more than 7% over the recommended once I buy the equipment I need. I'm not sure of the exact amount I need to spend but I know it's between £2-4K.

mwarby

Swings and roundabouts really, neither increasing limit or utilisation is what and underwriter wants to see. The difference is probably small and will depend on lender.

It may be best to focus on minimising additional credit and then on minimising the cost of that credit. Ultimately the less you can borrow and the less you need to spend to service the debt the more money is available for mortgage repayments