Does reducing credit card limit impact credit rating?

TheLondoner

Hi,

I reduced my credit card limit for two of my credit cards from £5k to £2k. I didn't like the idea of it being so high and I wanted to keep my credit limit low in case I decide to apply for a mortgage. My question is: is doing this bad for ones' credit rating? Does it negatively impact it for whatever reason?

Is so I'll keep that in mind before reducing the limit in the future!

[Deleted User]

Lenders may assume the card provider lowered it, which be concerning.

TheLondoner

@zx81 is there no way for them to find out this was done by the person with the card? It's ridiculous people should be penalised for being prudent in wanting a lower spend limit.

HappyMJ

TheLondoner wrote: »

@zx81 is there no way for them to find out this was done by the person with the card? It's ridiculous people should be penalised for being prudent in wanting a lower spend limit.

Stupidly yes it does reduce your "score" as your usage of the facility becomes higher. If you owe £1,800 against £2,000 of limit then you're at 90% of your limit which is high but if you leave it at £5,000 and owe £1,800 then you're using 36% of your limit which is reasonable. It shows you can not be tempted to use up to or near your limit if you have the money available to you.

I'd keep your usage of the facility at 50% or less at all times....so...if you can spend no more than £1,000 per month and pay it in full then go ahead and reduce the limit to £2,000 if you wish. It'll only affect your "score" for a few months.

takman

TheLondoner wrote: »

@zx81 is there no way for them to find out this was done by the person with the card? It's ridiculous people should be penalised for being prudent in wanting a lower spend limit.

Well if someone is reducing their credit card limits then that just shows that you can't trust yourself with such a high limit so makes you look like a higher risk.

£5k isn't exactly a high limit to start with. Why didn't you just keep one at £5k and cancel the other?

Arleen

TheLondoner wrote: »

@zx81 is there no way for them to find out this was done by the person with the card? It's ridiculous people should be penalised for being prudent in wanting a lower spend limit.

Look at it from their angle - for reason A or B your allowed amount of credit just went down, and yet, you are looking for more credit? It just looks fishy.

bsms1147

TheLondoner wrote: »

Hi,

I reduced my credit card limit for two of my credit cards from £5k to £2k. I didn't like the idea of it being so high and I wanted to keep my credit limit low in case I decide to apply for a mortgage. My question is: is doing this bad for ones' credit rating? Does it negatively impact it for whatever reason?

Is so I'll keep that in mind before reducing the limit in the future!

I'm not convinced the limit itself would impact the mortgage decision. The balance that you were carrying though would do.

TheLondoner

@Arleen I probably didn't make it clear but I am not seeking additional credit. I am trying to open a current account/savings account with no overdraft on the current account. As part of the application process they seem to want to do a credit check.

Interesting to know about how reducing one's credit limit looks to others though. I will keep that in mind and will stick with the limit they give me in future.

languagestudent

I have never had a form of credit before, but I am looking at a future where I wil need to start borrowing. I'm keen to open a credit card with a low limit. Would this be bad for my score rather than constructive, considering I've never had credit before?

[Deleted User]

See response to your identical post on the other thread. Sensible use of a card builds a good credit history.

It may make your score go up, down, or even off to Southend for a weekend break, but it remains entirely irrelevant.

Thrugelmir

TheLondoner wrote: »

@zx81 is there no way for them to find out this was done by the person with the card? It's ridiculous people should be penalised for being prudent in wanting a lower spend limit.

Only a temporary adjustment by the CRA's to reflect a sudden change. If you don't want to be penalised allow time for matters to normalise before applying for a mortgage. Always a good idea to review accounts held and credit limits on a regular basis. Only keep what you use or may have need of.