Reducing credit without reducing credit score 31 August 2021 at 3:45PM in Credit file & ratings 8 replies 201 views

Vicky24

Hi All, 

We have recently refinanced our lives, and I want to reduce dependence on credit. We had FINALLY gotten credit card free, and nil overdraft, however after fixing a few niceties and problems that have bugged us, we slid straight back into old patterns and I'm overdrawn (but not exceeded limit) again! We can't be trusted with an overdraft, it's too easy to justify that little tenner here and treat there, and we just end up splashing out. 

So
If I cancel all but a small amount of our overdraft, will that mess up our creditability? What about my now interest-bearing credit cards that are sitting in a drawer? I have 1 credit card that is rewards based, and I want to increase the limit on that, and should be able to do so in about a month now that the last hard search is 6 months old. I have reasonable credit now, and several utilities and the usual already. 

In short, if I want to get a few strategic credit lines (phones and rewards credit cards), is it sensible to close some current credit lines like my overdraft and unused credit cards? 

Thank you everyone!

MaryNB

Your credit score doesn't matter. Only you and Experian/Equifax/Transunion see it. Lenders will look at your credit file and do their own internal scoring. You don't get to see this score, they don't see the scores you have with the credit rating agencies, they only see the data on your credit file. 

Using a credit card is seen as a more responsible form of credit than an overdraft. Overdrafts really should be used for emergencies, not regular spending. Pay off your overdraft and use your low interest credit card instead.

I would recommend not having too many lines of credit, especially if you are struggling to stay out of debt. Make sure you have a manageable amount. If you have too many to keep track of it is harder to manager your money and to ensure you don't miss any payments. It's also not good to open up too many lines of credit in a short space of time - it looks like you are struggling for funds. The odd hard search here and there isn't too bad but too many and it could be a problem.

[Deleted User]

What lines of credit and limits do you currently have - and what's your income?

In general, there is little need to cancel accounts and I certainly wouldn't cancel everything except your overdraft. Any change in credit score doesn't matter, but the sudden closure of accounts will make you look higher risk and will also damage your ability to show you can handle credit.

I would only close accounts if either a) your income is dwarfed by your credit (eg you earn 10k and have 70k of credit) or you can't handle the credit responsibly, in which case close the accounts and stay off credit completely.

Brie

Some lenders (like when applying for a mortgage) will want to know how much credit you have available rather than just how much you are using.  That's why it's good to get rid of some of the least attractive cards and the overdraft.  If you have an emergency you can use a card rather than the OD and usually at a much better rate.  It will also set you up for getting better offers for 0% balance transfers.  

If you do have a real problem stopping using your credit cards you could try the old trick of putting them in a plastic tub filled with water and leaving that in the freezer.  In order to use the cards you have to wait for the ice to thaw and that gives you time to consider if spending the ££ is a good idea.

Elisheba

Its only anecdotal evidence I afraid as I don't know the ins and outs of it, but I closed a couple of credit accounts last year after having paid them off and my credit rating absolutely tanked. I still had other credit accounts that I was paying off the same as ever, so it wasn't anything to do with not having credit or having bad credit, so I would be wary.

MaryNB

Elisheba said:

Its only anecdotal evidence I afraid as I don't know the ins and outs of it, but I closed a couple of credit accounts last year after having paid them off and my credit rating absolutely tanked. I still had other credit accounts that I was paying off the same as ever, so it wasn't anything to do with not having credit or having bad credit, so I would be wary.

You credit rating doesn't matter. It is not seen by lenders. Lenders only see the data on your credit file and will carry out their own scoring which you are not privy to. 

femalemonarchfemalecanine

MaryNB said:

Elisheba said:

Its only anecdotal evidence I afraid as I don't know the ins and outs of it, but I closed a couple of credit accounts last year after having paid them off and my credit rating absolutely tanked. I still had other credit accounts that I was paying off the same as ever, so it wasn't anything to do with not having credit or having bad credit, so I would be wary.

You credit rating doesn't matter. It is not seen by lenders. Lenders only see the data on your credit file and will carry out their own scoring which you are not privy to. 

exactly, if you change anything your score will go up or down, and it also goes up and down when nothing changes. with the same information one score can go up and another will go down. the score is irrelevant. Your history is what matters.

Vicky24

Thanks folks! That really helps. Do credit cards close themselves if left unattended for a period? What sort of window? 

[Deleted User]

No, they don't close themselves. Lenders will occasionally close dormant cards. The window is anywhere between a year or so and never. But even active accounts can be closed.