Is a high credit limit with low utilization always good?

brokenlogic18

My main credit card provider has just offered to increase my credit limit to £12,500. This would bring the total amount of credit available to me to ~ £16,000.

This is far higher than I'd ever use. I never exceed £1,000 in any month and always pay off my balance in full. I don't feel like I'd be tempted to spend more as a result of this increase.

I'm hoping to apply for a mortgage in the next 5 years. Given that I have a high credit limit with low utilization would it be advantageous to accept the increase? I worry that a provider might see how much credit is available to me and be concerned that I'd use it unwisely.

Thank you!

[Deleted User]

Accept the increase.
It shows you can be trusted

PRAISETHESUN

I usually say to accept increases, unless you are struggling with debt and it would be a temptation to spend more money. As above, having higher limits shows you can be trusted, but at a certain point can actually start to hurt if your available-credit-to-income ratio gets too bad, since affordability also gets factored into credit applications. A lower % utilisation is a good thing however, so there is a bit of a balancing act, although since every lender has their own lending criteria (and most don't make that publicly available) there's no way you can really set yourself up in such a way as to be most desirable to lenders. On balance, I'd take the increase now and possibly review things closer to the time of taking out a mortgage.

System

You can't have too much available credit. There is some guy in America who "collects" credit cards, he has thousands of cards and MILLIONS of dollars in available credit. He only uses a few cards and a humble, normal amount of credit, paying in full every month. His credit file is just fine.

Please excuse the dailymail link - https://www.dailymail.co.uk/news/article-3385053/To-credit-score-nearly-perfect-one-man-held-world-record-credit-cards-amassing-staggering-1-497-worth-1-7MILLION.html

[Deleted User]

beany_bot wrote: »

You can't have too much available credit. There is some guy in America who "collects" credit cards, he has thousands of cards and MILLIONS of dollars in available credit. He only uses a few cards and a humble, normal amount of credit, paying in full every month. His credit file is just fine.

Please excuse the dailymail link - https://www.dailymail.co.uk/news/article-3385053/To-credit-score-nearly-perfect-one-man-held-world-record-credit-cards-amassing-staggering-1-497-worth-1-7MILLION.html

Lending terms and credit "scoring" in the USA is very different to that used here so isn't really a point of comparison

System

!!! wrote: »

Lending terms and credit "scoring" in the USA is very different to that used here so isn't really a point of comparison

Its a valid comparison. Yes lending terms differ over there but the bones of finance remain the same. You can't have too much credit, it's not a factor UK lenders consider. If your credit utilisation is low then it's all good.

MisterBaxter

Credit scores in the US seem to have more meaning with lenders taking more notice of FICO scores. Utilisation is a factor known to affect scores and the system can be gamed. There are a lot of people on forums and YouTube who explain how to game the credit scoring system in the US. I think this is where some our obsession with credit scores in the UK comes from.

I personally wouldn't rely on the US model as an indicator for lending decisions in the UK.

With that said the lenders do seem to like the idea that other lenders are willing to take a risk on you.

System

The Irony is, we DO have a credit score in the UK. Every time you apply to a lender, they will score you, and there will be a numerical output. It's just that, well we don't get to see it! And it certainly isn't the same figure that the credit agencies give you.

8ofspades

From MSE email this week:
"Improving your credit score is an art, not a science, so sadly there's no definitive answer. All lenders are different, and there are various factors to consider.

For some, unused credit will be a complete turn-off - as they may worry you'll go out and spend it in one afternoon, and thus decrease your likelihood of being able to pay them back if they granted you a card."

Our mortgage advisor recommended I close 2 of the 4 credit cards I had (and wasn't using) as the amount of available credit available to me may have affected our application. I kept the two best and use them regularly now (although nowhere near the limit) - it seems different people have different opinions and likely lenders will too. I wouldn't stress too much however, I guess if you use a mortgage broker when the time comes, they may have some familiarity of the criteria of different lenders they utilise.

[Deleted User]

We don’t have generic or universal scores.

As you’ve rightly pointed out lenders use their own mechanisms and algorithms to match (score) you against their product set.

People that post on here get hung up over the CRA scores thinking THESE are what the lenders see. And they’re not.

kingstreet

brokenlogic18 wrote: »

I'm hoping to apply for a mortgage in the next 5 years. Given that I have a high credit limit with low utilization would it be advantageous to accept the increase?

It will make absolutely no difference.

Mortgage lending is much more "broad-brush" than the kind of micro-management people seem to want to employ on here.

Loan to value, time in job, time at address, income/affordability and no adverse credit are the real issues.