Should I cancel an unused credit card before or after applying for a new one?

purplebanna

I have two credit cards, one from Natwest which I used for a 0% purchase (stoozing), and one from Lloyds which I have had for 13 years which I very rarely use (the occasional purchase where I want consumer protection).

I now want to get a rewards card from Virgin, but I'm conscious having two credit cards already may impact the amount of credit they give me.

If I close the Lloyds account, will this increase my chances of acceptance/the amount of credit they offer me, or will closing it ruin my 13-year history of on-time repayments in full?

I'd hate to close it, only to be rejected by Virgin, and be without a card.

[Deleted User]

If you only have two, keep them both open.

Once you get to nine or ten cards, you could think about closing one if you really felt the need 

purplebanna

Reading on the Experian website it says:

Try to keep old, well-managed accounts. Credit scoring looks at the average age of your credit accounts, so try not to chop and change too much.

So on that basis, maybe I should keep it, and worry about my credit limit once I've got the card!

[Deleted User]

Ignoring any nonsense from Experian, keep both the cards, both before and after your application.

virgo17

[Deleted User] said:

Ignoring any nonsense from Experian, keep both the cards, both before and after your application.

Totally agree. Experian and their  "credit scoring" my @rse.

cymruchris

Most card providers have eligibility checkers on their websites - Virgin do - use those to get a strong indication as to whether your application will be successful. (Don't use comparison sites).

I wouldn't close either of your two existing cards even after getting a new one. 

[Deleted User]

All I would say is solely as an anecdote, lenders I have used and been sensible with have been happy to increase my card limits over time, but I have noticed that on the initial application, the credit limit each new card I have taken out has been trending down. E.g. Barclaycard have upped my limit from about £4000 to £11,000 over 6-7 years or so, my most used cards have ticked up fine but the last couple of cards I took out, the initial offer was lowering e.g. Natwest was about £4-5k, M&S about £4k, Santander (most recent) was £2.5k so there is probably a point where they judge earnings vs available credit, weighed against past behaviour. Two cards is fine, having a third is a good idea

Marchitiello

Deleted_User said:

All I would say is solely as an anecdote, lenders I have used and been sensible with have been happy to increase my card limits over time, but I have noticed that on the initial application, the credit limit each new card I have taken out has been trending down. E.g. Barclaycard have upped my limit from about £4000 to £11,000 over 6-7 years or so, my most used cards have ticked up fine but the last couple of cards I took out, the initial offer was lowering e.g. Natwest was about £4-5k, M&S about £4k, Santander (most recent) was £2.5k so there is probably a point where they judge earnings vs available credit, weighed against past behaviour. Two cards is fine, having a third is a good idea

That is a good observations as I also believe it does reach a limit Vs earning (I normally have a combined CL of 125-150% of my income), but also there is a definite impact on what borrowing you already have in relation to your income (rather then % utilisation) as you may well have large saving and investment and at the same time have stoozed 50% of your income from CC, but they can only see the borrowing not the saving. 

Ebe_Scrooge

Marchitiello said:

Deleted_User said:

All I would say is solely as an anecdote, lenders I have used and been sensible with have been happy to increase my card limits over time, but I have noticed that on the initial application, the credit limit each new card I have taken out has been trending down. E.g. Barclaycard have upped my limit from about £4000 to £11,000 over 6-7 years or so, my most used cards have ticked up fine but the last couple of cards I took out, the initial offer was lowering e.g. Natwest was about £4-5k, M&S about £4k, Santander (most recent) was £2.5k so there is probably a point where they judge earnings vs available credit, weighed against past behaviour. Two cards is fine, having a third is a good idea

there is a definite impact on what borrowing you already have in relation to your income (rather then % utilisation) as you may well have large saving and investment and at the same time have stoozed 50% of your income from CC, but they can only see the borrowing not the saving. 

Exactly this.  Savings are not reported to the CRAs, and play no part in lending decisions.  Income vs debt is an important component of the scoring algorithms.

Quite apart from anything else, you could declare - even prove - that you had a big pot of savings. Then as soon as you've been given the credit you applied for, you could go and blow your entire savings pot on a Ferrari and a world cruise

MalMonroe

I agree with those who are saying don't close either, before or after. I've had some terrible financial trouble and I started a DRO about 9 years ago too. After pulling myself together, contacting StepChange and pulling my socks up, I now have three credit cards - Virgin, Tesco and Sainsburys with a joint credit limit of £10k. I only use a card to buy things I need (not want, very important difference) and then pay off the balance in full every month, as Martin has drilled into me. Sometimes I vary which card I use but also I sometimes 'freeze' one or other of them. At last I'm a competent money user (it only took about 65 years). Just have to remind myself that whatever the limit on any credit card, it is NOT my money. It isn't, right?

I prefer to use a credit card also for purchases where I may want to rely on Section 75 in the future, you never know. I did once have a (successful) claim so it's worth doing. As long as the balance is paid off in full every month, as always.

What cymruchris also says above, about not using comparison sites but using the credit provider's own website, is good advice.

purplebanna

Thanks for the feedback all.

I am surprised the consensus is to keep all three, so I will go with the advice.

P.S. Last night I tried their eligibility checker and it says I am pre-approved. Happy days.