Lowering Credit Limits

Jolin

Hi there,

Just wondering if this is advisable. I'm sorting my finances this year and have joined the credit club and taken a look at my credit report. My credit utilisation is good at present and I'm aware that if I lower credit limits that would change however,I'm looking at the longterm picture and don't intend on using any more credit for the forseeable future or applying for anything that would be impacted .

I have currently used £1800 of £16000 available to me and intend on clearing that this year. I have a Next account with a credit limit of £5000 when I've never had a balance of more than £100. A Very account which is similar, a huge amount of credit available but that I've never used,they just periodically increase the limit. Does it make sense to reduce these right down?

Arleen

Why not just close some of the cards if you don't need them?

CakeCrusader

I'm not sure these are cards.


You don't have to spend all of this, so if you're able to keep a tight hold of your spends there's no reason to lower the limit. A higher limit does look better on your credit report, I think, as it shows that you're able to manage your finances. It's best to have a low credit utilisation though.

Jenkic20

Or it looks to a lender like you can quickly utilise £16k of credit massively changing your financial profile.

I got rid of mine - closed Next account (£5k like yours), wife closed her Very account. Also closed 2 credit cards and lowered the limits on my remaining two.

My available credit now is £5k and I utilise no more than 10% of it and it still shows as a positive on my fictitious Experian rating. :money:

Jolin

Thanks for the replies.

Arleen, I wasn't thinking of closing them because I'm not concerned that I'll run up debt on them. I've had both for years and haven't and they ocassionally come in handy. Very has free click and collect delivery as does Next and I like to be able to order different styles and sizes to try and send back the ones I dont require which is also free. Very also does a years interest free credit and as long as I can't get the item cheaper elsewhere,I have taken advantage of this on occassion. Thanks for your reply.

Thanks Cakecrusader and Jenkic20. I think I will look to lower them once I've cleared the £1800 of debt I've got ( not on Next but approx £540 on Very which is interest free at the moment). If I wait till I've cleared this then I will have zero of whatever credit available utilised is my thinking and like you,Jenkic20, I won't be looking to utilise all of it moving forward.

Jenkic20

Good luck whatever you do. :beer:

Ben8282

Jolin wrote: »

don't intend on using any more credit for the forseeable future or applying for anything that would be impacted .

I have currently used £1800 of £16000 available to me and intend on clearing that this year. I have a Next account with a credit limit of £5000 when I've never had a balance of more than £100. A Very account which is similar, a huge amount of credit available but that I've never used,they just periodically increase the limit. Does it make sense to reduce these right down?

£16K is not a lot of available credit unless of course you are on a low income.
If as you say you don't intend using any more credit or applying for anything, why are you so bothered?
In the absence of strong evidence to the effect that the amount of unused credit you have available is actually causing you problems with specific credit applications, I believe that it is never a good idea to reduce credit limits as 1) nobody will ever know why and by who the limit was reduced and 2) it is very easy to reduce; it can often be harder to get back later.

Jolin

Ben8282, my income is only a few thousand more than this. I have a mortgage and a car loan and it boggles my mind that I have £16000 available to me on top of this. The most I have ever utilised at any one time was £3500 but this would be on credit cards which I'm happy to keep as they are. Just seems a bit silly have massive credit limits that I have never been close to using.

I can't see myself requiring credit again till 2019 when my car is paid off and I get a new one so whatever I do will most likely not have a huge impact at present.

Chappaz

I believe that larger credit limits show lenders that you've clearly done something right up to that point as you've been trusted with such a large amount of credit by other lenders.

And whilst there is that risk that you have the opportunity to suddenly find yourself with a huge pile of debt if you wish to do so, the file history should show that this is extremely unlikely to happen.

This is just speculation, but to me, it would look more suspicious if someone voluntarily reduced their limit right down, because this could imply that they don't trust themselves with that much credit and want to remove the temptation.

And on the flipside of that, having so much credit with low utilisation shows that you've never been sucked into the temptation of building up a lot more debt than you can afford. It's proof that the carrot has been dangled in front of you, but you've never taken a bite.

There may be some reasons why it is worth reducing the limit. I'm not sure. But to me, I can see potential negative impacts without any benefits.