New Loan vs Old Credit Card(s)

Ray247

New Loan vs Old Credit Card(s)



Hi guys, so i have been wondering..

I want to borrow around £20,000 in 2019 in the form of a single loan, i already have two credit cards with £5700 on one card and £8500 on the other, so combined amount of 14,200 available credit (not debt).

I do not want to use this available credit, for a number of reasons, for example because the slightly higher interest rate will be charged every month on any outstanding balances and it comes without good incentives on the cards such as 18 months interest free etc, and none of the cards have money transfer option anyway.

I have a very high credit rating already, so my question is should i close these 2 cards, and then apply for a loan? Or should i apply for a £20,000 loan while having £14,200 already outstanding in available credit?

[Deleted User]

You say a high credit rating I hope you don't mean credit "score"
I suppose your options will be governed by you income which you don't state.

DCFC79

Ray247 wrote: »

New Loan vs Old Credit Card(s)



Hi guys, so i have been wondering..

I want to borrow around £20,000 in 2019 in the form of a single loan, i already have two credit cards with £5700 on one card and £8500 on the other, so combined amount of 14,200 available credit (not debt).

I do not want to use this available credit, for a number of reasons, for example because the slightly higher interest rate will be charged every month on any outstanding balances and it comes without good incentives on the cards such as 18 months interest free etc, and none of the cards have money transfer option anyway.

I have a very high credit rating already, so my question is should i close these 2 cards, and then apply for a loan? Or should i apply for a £20,000 loan while having £14,200 already outstanding in available credit?

Who gives you the high credit rating ?

Maybe consult them then.

Theres 2 other credit ref agencies who lenders use, not all lenders use 1 agency so maybe 2 or 3.

Nasqueron

Lenders will assess your affordability based on current debt, potential exposure to debt (e.g. 20k loan + 14.2k credit cards which you might run up if you had issues with the loan repayment) and salary. If you were earning say £40k a year and had a good savings balance / good credit record then they might say yes, if you were on 100k they'd most likely say yes, if you were on 20k they would likely say no. You could always lower the credit card limits if you aren't really using them.

Ray247

Thanks for the replies guys, and thank you Nasqueron -

So i think the best thing for me to do is close these credit cards since i cannot really use this 14.2K for what i intend, wait at least 6 months or longer and then apply for a loan.

What i really hope is that closing these 2 cards (that i am not utilising and dont intend to utilise) will not leave a negative fingerprint on my Credit File.

Nasqueron

Personally I'd keep them but lower them say to around 2.5k each so you have credit available which is better than not having any. However I would recommend you do use the card every month and pay off in full as it looks better for your rating than not having any activity. Maybe get a sim only contract for a phone too and ensure it is always paid off

Nebulous2

I'd disagree with the above advice. I dont think people should mess with credit limits. It potentially says you have had the limits reduced by the credit card company, or you don't trust yourself not to use available credit.

The credit cards will be a very small part of the decision. Stability of address, employment, good repayment history, income levels and any other debt will all be more important.

I'd keep both cards, use them regularly for shopping you would buy anyway and repay in full every month. Try an eligibility checker before you apply.

Nasqueron

Nebulous2 wrote: »

I'd disagree with the above advice. I dont think people should mess with credit limits. It potentially says you have had the limits reduced by the credit card company, or you don't trust yourself not to use available credit.

The credit cards will be a very small part of the decision. Stability of address, employment, good repayment history, income levels and any other debt will all be more important.

I'd keep both cards, use them regularly for shopping you would buy anyway and repay in full every month. Try an eligibility checker before you apply.

Do you have any evidence that changing your card limits says anything like that? Do you know whether a personal request to lower the rating is even seen by another lender, let alone whether another lender sees the reason for the change? Do you know if lenders see the past history of credit card limits or just the snapshot at the time of application?



The OP has a potential exposure to credit of 14k already, based on responsible lending, that will be taken into account when judging affordability of the loan i.e. 14k + 20k. Given the OP says they don't use the cards, the utilisation is zero anyway, if they are spending perhaps 1k a month over 2 cards then having a 2.5k limit (i.e. 20% on each card) and paying off in full every month is going to look better than someone having a high potential debt to income ratio than having the CC limits + loans

Nebulous2

Nasqueron wrote: »

Do you have any evidence that changing your card limits says anything like that? Do you know whether a personal request to lower the rating is even seen by another lender, let alone whether another lender sees the reason for the change? Do you know if lenders see the past history of credit card limits or just the snapshot at the time of application?

There is very little information on here based on evidence - because companies all have different algorithms and the people who know them aren't allowed to say.

The companies (or their computers) see pretty much the same as you do, except for the names of the lenders, balance, credit limit, promotional markers etc.

They wont see why a credit limit was reduced, but the odds are higher that it is a negative reason than a positive one. I already highlighted two possible negatives for that.

The OP has a potential exposure to credit of 14k already, based on responsible lending, that will be taken into account when judging affordability of the loan i.e. 14k + 20k. Given the OP says they don't use the cards, the utilisation is zero anyway, if they are spending perhaps 1k a month over 2 cards then having a 2.5k limit (i.e. 20% on each card) and paying off in full every month is going to look better than someone having a high potential debt to income ratio than having the CC limits + loans

What's your evidence it will be taken into account when judging affordability? Just because you keep repeating it doesn't make it right. We don't know what the OP earns, but £14k in total credit card limits is not very high. Potential debt to income ratio isn't important, actual debt to income ratio is.

Would you rather give person A a loan of £20k of your own money knowing someone else trusts them with £14k or give person B a loan of £20k when the only evidence you can find is that they are trusted with £5k?

I've repeatedly said I've had over my salary in credit card limits for over 20 years. At times I've had over twice my salary. During that time I've had loans, mortgages, cars on finance and lots of money on 0% credit card deals.

That doesn't concern lenders because - and this is the important bit - credit card limits are only a tiny bit of the equation. I've been on the ER at the same address for over 20 years, I'm in stable employment, with a history of handling credit accounts responsibly.