Does reducing credit limits help?

julieb81

Hi,

For at least a year I have had a Tesco card (£2,500 limit), M&S &More (£3,500 limit, reduced from £7k 2yrs ago), and Nectar Amex (£750.00 limit). I also have a £7k loan (paying until July 2010) and £72k Halifax mortgage. I am always worried about my credit rating, but last week got a Barclaycard Platinum with a limit of £3,080.00, in order to balance transfer £1,800 from my Tesco card, which I was surprised at getting.

I hope to clear the £1,800 over the next 14mths (while its 0%) and not use that card for spending, and would like to keep the Nectar, Tesco and M&S cards for spending, in order to gain Nectar/Clubcard/&More points, then pay the balances in full every month. Combined this would only come to several hundred £ per month, therefore there is thousand's of unused credit.

Does this go against me when it comes to credit rating / scoring? Should I reduce any credit limits? I do not want to bring all of them down too low, incase I do ever need the extra for an emergency. My mortgage is up at end of March 2008, so I plan to start applying for new deals from January, and want to see if I can improve my credit rating at all.

I live on my own and do not have a high income, but do not miss payments, etc.

Grateful for any advice!

Julie

Bokkens

There is no clear cut answer.
Living on your own ,one income as you said not high can work against you.
Completing your mortgage and the continual paying of credit card payments on time will continue to help in keeping a reasonable credit score/rating and enable you to continue to get credit in the future.
Once the mortgage has been completed and it appears on your credit file as "settled" you may find that you will have a increase in some of the limits as the banks will percieve that you now have extra cash to spend.
To try and make it easier for yourself move as much as you can onto the 0% card in 14mths time you will have completed on your mortgage and your credit rating will have improved from the reasonable level you are at now so there shouldn't be a problem getting another 0% card if you haven't managed to pay it all off.
You can reduce the credit limits,but you may not get them back very quickly as your circumstances may change or the lending policy may change.As long as you manage the cards well and there is some left for that "emergency" you should be okay.
Read up on Martin's articles if you need more information,or post here again.

GeorgeUK

I would suggest having a couple of thousand available for emergencies.

As i understand it, credit companies weigh your income against the amount of available credit. So you probably won't be declined by the majority (and those not currently being picky) until you reach 50%(ish) of your income.

The danger with reducing credit though, is that companies look at the amount of credit you have available and see how much of that is currently in use.
eg. You have £7,000 available on a card but only have £5,200 used
So they may see you as a good risk as you are only using about 75% of available credit.

If you were to reduce the card to £5,500 though and needed more credit they may be a little more cautious as you are using 95% of your available credit.

Personally, i wouldn't reduce the limit on a card unless i intended to keep that card and had no other CC debts. If you want to get rid of some of your credit, once a card has been cleared (and possibly seeing if they'll give you another BT deal a few months later) i would close the card if i wasn't getting any benefit from it.