Balance transfers & credit limit calculations

adamw123

Hi everyone,

First of all, apologies if there is an existing thread about this. If there is, please point me to the right direction.

I would like to seek advice on how to approach clearing my debt of £6,900.

I have...
1. A credit card with a limit of £10,000 around with a balance of £6,900. Interest-free until February 2018, then it will be 22.9%.
2. A credit card with a limit of £2,400 with £0 balance (all paid off) but still have the account.

My financial situation had changed a lot due to a severe loss of business, and have been earning a small income of £1,000 a month (it's starting to pick up again, but I used to be on £2,000 a month).

My questions are:
1. When is the best time to apply for another credit card with a long balance transfer offer? (w/ Feb 2018 as a date in mind to transfer it).
2. What calculates the credit limit the lender will provide once application is successful? Ideally, I'd need a card with a credit limit that can help me transfer the balance.
3. Does requesting a limit increase on my 2nd card affect my chances of getting another credit card?
4. Is it worth closing the existing £2,400 card or keeping it...? I'm getting it increased every six months, but there hasn't been any good offers.

I appreciate any answers... Still don't know about all these algorithms lenders use to calculate everything.

Thank you

eskbanker

They deliberately don't publicise algorithms as this would potentially open them up to fraud, but some of the factors are contradictory anyway, such as credit used versus available credit, and available credit versus income. Closing your smaller account to reduce your available credit would worsen the first ratio but improve the second one, so there isn't any right or wrong answer to this.

However, the latter ratio is about 100% at the moment which is high, so the prospect of getting another large credit limit that would increase it substantially is probably low. You might wish to experiment with the MSE eligibility calculator to see how likely it is that you'd get another card, but there isn't any way of projecting likely limits.

One last point - if business is picking up then leaving it as late as possible may work for you if your income in, say, December, is likely to be better than it is in May.

adamw123

Thank you!

In regards to your second point, would you say it's good to do a balance transfer of say... £1,000 from my first card to my second? That'd take it up closer to 50%. Is there any point?

[Deleted User]

Not really, as it doesn't change the overall picture.

eskbanker

adamw123 wrote: »

In regards to your second point, would you say it's good to do a balance transfer of say... £1,000 from my first card to my second? That'd take it up closer to 50%. Is there any point?

No, I was referring to your available credit being much the same as your annual income, i.e. £12K each - shifting debt between your existing cards won't help unless a reduction in interest offsets the fees for doing so.