Credit Utilisation Ratio??

RhymeRocket

Hello- first post here so please forgive me if this has been answered several times over. I tried searching for an answer but couldn't find the answer..
I have three credit cards with various limits, 2 of which have a zero balance.
MBNA is £8600 limit - 0 balance
Vanquis - £5000 limit - 0 balance
Barclays approx £600 balance, limit is £1200.
I tend to use Barclays as it's on my banking app so most convenient.
I don't use Vanquis - got it for credit building a few years ago.
I was worried re fraud having such big limits so I called Vanquis to close my account down. The lady on the phone asked me if I knew about credit utilisation ratio and that possibly closing the card and losing the credit limit amount could negatively affect my ratio? I have never heard of this before - is it an actual thing or vanquish trying to keep customers.
Is it better to have more cards open? I would have thought it makes you more risky as in theory you may go on a mad one and spend all the money??? Rack up loads of debt all at once?

Dar1976

Hi.

Your total available credit vs your balances will give you a ratio of debt utilisation.

If you close an account, the total available will reduce and therefore increase your utilisation.

There are maximum utilisation levels that are ‘acceptable’ before it looks like you struggle with debt. Keeping unused accounts open will keep that Utilisation Ratio low and look better to lenders.

Dean.

[Deleted User]

Ignore any reference to utilisation.

Keep the card open though.

Ben8282

Your current utilisation rate of 4% is very low.
If you close the Vanquis card it will increase to 6% which is also very low.
Your limits are not big in any real sense.

PixelPound

No real need to close if you just have three cards, how old are the cards, if vanquis is your oldest account can have a negative effect closing it. Do you carry a balance on the Barclays, see if one of the other two will give you a promotional balance transfer.

If it's just because of the app, don't MBNA and Vanquis have banking apps - tbh I'd be more tempted to close the barclays account with its low credit limit!!

RhymeRocket

Thanks for the replies, it makes more sense. Is this a new thing? I don't remember this being an issue years ago - I always thought it was best to close credit cards you didn't need.


Nic-c good tip about the promotional rate too - Vanquis is 9.9% for the life of the balance with no fee, MBNA is 0% for 26 months but with a 2.89% fee. I assume from those that MBNA would be cheaper assuming I pay it off within the 26 months, which I would. It seems like its actually 2.89% interest if that's the case. Is that right? Maths is not my strong point!

RhymeRocket

Ps yes Vanquis is my oldest account by far, I got it 7 years ago when I was trying to build credit as I'd not had debt before other than a mobile contract. It goes against the old advice that any debt is bad- if you don't have debt ever then you are seen as risky!

[Deleted User]

Keep the cards open.
Don’t decrease any limits either.

Ben8282

RhymeRocket wrote: »

Thanks for the replies, it makes more sense. Is this a new thing? I don't remember this being an issue years ago - I always thought it was best to close credit cards you didn't need.


Nic-c good tip about the promotional rate too - Vanquis is 9.9% for the life of the balance with no fee, MBNA is 0% for 26 months but with a 2.89% fee. I assume from those that MBNA would be cheaper assuming I pay it off within the 26 months, which I would. It seems like its actually 2.89% interest if that's the case. Is that right? Maths is not my strong point!

The thing here that comes across as not good is that you are carrying a £600 interest bearing balance on one card while apparently not using the other cards at all. What sort of impression would be gained by the apparent inability to repay a £600 balance or paying a fee to transfer it?

Use one or both of the other cards for purchases. Most people spend over £600 in a month. Repay the Barclaycard. Repay the card(s) used for purchases in full every each month. The delay between making the purchases and having to pay should give you a clear month's money to pay the Barclaycard if you time it correctly.

CakeCrusader

You need to use the Vanquis one every now and again or they will close it (I haven't used mine for 12 months, they emailed me yesterday and said I need to either use it or call them or they'd close my account. I used it last night for a £20 payment and I've set up a direct debit to clear the balance). The interest rate's ridiculous so it's not worth carrying a balance on it. Your limit on it is quite high so I'd keep it if possible.