Should I accept an increased credit limit?

sockhead

Hi everyone,

First time posting on here, so be nice!

Currently have 4 cards, running 0% balances, all due to expire in May/June. One of the lenders has offered to up my credit limit substantially (enough to put the rest of the balances in one place), but their 0% deals are for existing customers are few and far between. We will be looking to shift the debt around in May, possibly to a new card which will hopefully be enough to cover all 4 current debts.

Should I accept the new credit limit? Will this have a negative impact when it comes to applying for a new card due to available existing credit?

Cheers,
Sockhead

chattychappy

Other things being equal, I'd take the increase.

Of course other things are never equal. Some people say that lenders worry if you have too much available credit (perhaps as a ratio to your income) because you could "go crazy". On the other hand, if, say you have used up 80% of your available credit then you could be looking rather distressed. An increase in limit would reduce this percentage and that could make you look better.

Candyapple

Think about it like this, you say you have 4 cards all with balances on them.

Card 1: Limit £3k / Owe £2k
Card 2: Limit £3k / Owe £2k
Card 3: Limit £3k / Owe £2k
Card 4: Limit £3k / Owe £2k
Total limits: £12k / Total owe: £8k = using 66% credit utilisation

Assuming each card has a £2k balance on it, you owe £8k collectively. If one of the cards is offering to increase your limit from say £3k to £9k (thus incorporating all your other debt) you would now have….

Total limits: £18k / Total owe: £8k = using 44% credit utilisation

This is good because it lowers your credit to debt ratio however, you stated that your 0% deals aren’t due to end for at least the next 6 months and the lender who is offering the increase isn’t known for offering 0% offers so what will happen if you accepted the increase now is in 6 months’ time you wanted to apply for a new card(s), then any lender will see you have £10k in unused credit and you are wanting to take out more credit. If you were accepted you would probably get a low limit or a flat decline for affordability issues. It’s a known trick for lenders to do this sometimes to keep your business with them.

Cycrow

It can be good or bad. Increasing your limits without increasing the debt means your credit utilisation will reduce, which is a good thing.

However, your credit to income ratio will increase (which can be bad if it gets too high)

planteria

which provider has offered the increase? who are the other accounts with?

i have never turned down an increase.. but i've closed plenty of accounts if there is nothing useful available from them.

is your objective to keep the debt rolling at 0%?

sockhead

Hi - HSBC offering the increase, other cards are with Barclays and Nationwide. Aim is to keep rolling onto 0% until they are all clear

planteria

ok, good..
agreed re. HSBC not usually offering repeats. i bank with them, and have had some good deals...but have always closed & reapplied some time later.
of those, Barclays is your best 'partner' imo.
if the deals come to an end at a similar time perhaps best to try to move all to MBNA, and close Nationwide and HSBC.. potentially then moving the debt back to Barclays in the future:think:

Anthorn

Candyapple wrote: »

Think about it like this, you say you have 4 cards all with balances on them.

Card 1: Limit £3k / Owe £2k
Card 2: Limit £3k / Owe £2k
Card 3: Limit £3k / Owe £2k
Card 4: Limit £3k / Owe £2k
Total limits: £12k / Total owe: £8k = using 66% credit utilisation

Assuming each card has a £2k balance on it, you owe £8k collectively. If one of the cards is offering to increase your limit from say £3k to £9k (thus incorporating all your other debt) you would now have….

Total limits: £18k / Total owe: £8k = using 44% credit utilisation

This is good because it lowers your credit to debt ratio however, you stated that your 0% deals aren’t due to end for at least the next 6 months and the lender who is offering the increase isn’t known for offering 0% offers so what will happen if you accepted the increase now is in 6 months’ time you wanted to apply for a new card(s), then any lender will see you have £10k in unused credit and you are wanting to take out more credit. If you were accepted you would probably get a low limit or a flat decline for affordability issues. It’s a known trick for lenders to do this sometimes to keep your business with them.

Hat's off. At last, someone who can actually think and use their common sense.

But with reservation. If you have credit available it could be that another lender will offer you credit in the hope that you will spend your available credit with them simply because lenders are in competition with each other. Saying that other lenders will not offer you credit because you already have it albeit unused is detracting from the competition element.

But yes, yes, yes, the percentage of overall credit used is very relevant: That's why it's in my signature!

Sharon87

I accepted an increase on my Tesco from £900 to £5900! They don't offer 0% deals often either. A few months after the increase I decreased it to £2000, so still had more credit than I previously had, but it meant I didn't have such a big ratio of credit compared to my income. 2 months later my MBNA card increased my limit by £3300... and then offered me deals!

I would take it for now and then you can decide to decrease it to a more sensible limit later on

sockhead

Thanks for all your advice everyone, I will accept the increase and then reduce it later if needs be.