Close Credit Card - negative impact to Credit Score?

ike2112

I have a total of 4 credit cards currently:

1. A TSB card I've had for about 20 years, the credit check companies pick its length of term up from ~2013 when Lloyds TSB split but I'd had it even longer.  However since it has poor APR and gives no rewards (it used to be linked to Avios), I no longer use it other than it still being linked to a few apps like Ringo and a couple taxi companies.  I bank with TSB for current and joint accounts, so its also handy to have it on the same app/still have visibility of it, I would quickly see any unexpected charges/fraud.  Any charges I get on it, I pay off immediately.   Balance effectively Zero. Limit £4,700.
2. AMEX Platinum.  I get cashback reward; 0.75% on the first £10k, 1.25% on the rest per year.  So I try and use this card for everything, and pay off each month - we were going a big holiday this year so I used this card as much as possible there, have earned nearly £550 cashback total this year, was around £380 last year.
   Balance gets to around £2,000-2,500 a month then is normally paid off monthly as the APR is horrendous. Balance effectively zero but usually shows on credit assessment as around £2k (I guess they take a snapshot at end of month, when my statement date is I think the 8th).  £15,000 limit.
3. Virgin Balance Transfer Card.  This was taken out to move over an old balance but I also used it to pay around £2k of the big holiday I alluded to as it also had a 0% purchase 'bonus period' at the time.  The first of these 0% periods expire Aug 2023.  Balance £12,000.  Limit £12,500.
4. Tesco Clubcard Credit Card.  Our nearest supermarket is now Tesco so made sense to get a card for there.  However at the time I didn't have the Virgin card above, and needed a balance transfer, so I got this one.  It was maybe 12 or 18 months 0% which has long since expired so I had to open the Virgin card to move the balance over.  Its now used because it doubles as a Tesco clubcard and I get Tesco points etc, but in hindsight it would be of more use as a 0% purchases card - or being able to open a new 0% balance transfer card to move the Virgin balance to when required later this year.  Usually paid off in full each month but in December I paid too early, meaning it looked like I missed Jan payment.  Balance £740.  Limit £7,900.
5. Key additional info - plenty of places still don't accept AMEX, thus I use the Tesco Card a fair bit in the month and will continue to need an active Visa/Mastercard for that purpose - but would prefer one which provides some sort of benefit.  The old TSB Avios duo-card was ideal (an Amex and Mastercard linked to the one account, giving different levels of points per £ spent).
   

So overall I have access to £4,700 + £15,000 + £12,500 + £7,900 = £40,100 of credit.  I am using approx £2.500 + £12,000 + £750 = £15,250.

One of the credit check companies, I think Credit Karma, states that using less than half of your available credit is a positive for your credit scoring. 
My score did raise/improve when AMEX increased their limit on the card (by around 3k) around the same time I opened the Virgin account (which raised my limit from previous card by ~2,5k).

In my mind the sensible thing to do is:

• Close the TSB card.
• Move the Virgin 0% card to a new 18-24 month agreement elsewhere.
• Close the Tesco Card - but replace with a Tesco 0% purchases card or something that offered greater benefit.
• Tesco do allow you to have multiple cards, but don't show by default when I try do an affordability check, and when I asked them they confirmed in principle I can have 2 cards with them but they've no way of saying if I'd be approved, even if I closed the existing one first it may "stay on their systems a few months".
  

My income is fairly steady, I work for my own limited company however so some of my income is in dividends and taxed differently to the usual 20% and 40%, making the declaration of total income slightly awkward depending on whether they ask for Net or Gross.

So I am not sure whether I should proceed with my intended actions of closing the TSB card due to non-use?  Or if reducing my total credit, I'll simultaneously increase the percentage of credit being used and thus negatively impacting my credit scoring ahead of applying for the other cards.
I'd prefer to turn the Tesco Card into something mildly beneficial like a 0% purchases card, but its not essential / lower priority.

I need to replace the Virgin 0% balance transfer card before August - I will probably pay off about 2 grand of it by then.

So should I actually replace the TSB card with a Visa/Mastercard that offers some sort of reward or cashback, then open a 0% balance transfer in August and move the Virgin card, then after that around Xmas time see if I can close then replace the Tesco card?

That much credit card turnover close together will likely also negatively impact credit rating, so I'd like to start asap so I have time to spread it out.

CliveOfIndia

ike2112 said:

One of the credit check companies, I think Credit Karma, states that using less than half of your available credit is a positive for your credit scoring.

It may well be a positive for your credit score.  But since your credit score is utterly meaningless and is not even seen by any lender, that matters not one jot.

The general rule of thumb is that long-standing well-managed lines of credit are good for your credit history - which is what matters.  But aside from that, just choose a card that gives you some form of reward that's of value to you, whether that be airmiles, cashback, Clubcard points, whatever.

Whatever you do in terms of closing cards or opening new ones will make your score drop - but that's of no consequence at all.  Your ability to obtain credit will depend on the data contained within your credit history, as well as debt/income ratios.  It doesn't matter what percentage of available credit you're using as long as you're repaying in full every month - it only becomes an issue if you're carrying a balance from month to month.

ike2112

CliveOfIndia said:

ike2112 said:

One of the credit check companies, I think Credit Karma, states that using less than half of your available credit is a positive for your credit scoring.

It may well be a positive for your credit score.  But since your credit score is utterly meaningless and is not even seen by any lender, that matters not one jot.

The general rule of thumb is that long-standing well-managed lines of credit are good for your credit history - which is what matters.  But aside from that, just choose a card that gives you some form of reward that's of value to you, whether that be airmiles, cashback, Clubcard points, whatever.

Whatever you do in terms of closing cards or opening new ones will make your score drop - but that's of no consequence at all.  Your ability to obtain credit will depend on the data contained within your credit history, as well as debt/income ratios.  It doesn't matter what percentage of available credit you're using as long as you're repaying in full every month - it only becomes an issue if you're carrying a balance from month to month.

Thanks for the reply.

I'm aware that your 'score' is conceptual at best, hence why every one of these 'credit score' companies uses a different scale, and whilst they're not arbitrary - they're based on your credit record - they aren't in any way consistent.
What is a consideration though is that each of them was created based on knowledge of what particular lenders actually take into account.  What AMEX see as more important mid-level indicators of risk might differ to Tesco Bank's perception.  Although the top-level indicators are always, as you've said, the debt/income ratio and behaviours.

And I think your last sentence is what concerns me.  I don't repay in full every month.  I do on the TSB card, and I normally do on the Tesco and AMEX card, other than 2 occasions where I paid too low an amount or when I actually forgot to make the payment at all (somehow I didn't have the minimum DD set up, .and did not realise).  The Virgin card is a 0% balance which I do not pay off any more than around £200 a month at the moment.
Its not clear how much that will impact my ability to apply for another card and sort this little mess out.

My available options when I used one of these availability things, was not great.  Much less than what it would have been 2 years ago certainly.  And yet I have a pretty strong income, around 80k, I use the cards through choice rather than necessity.  So I am trying to figure out why this is and am really worried I go ahead and close cards to improve my credit record and then find I can't get approved for one to replace it.

CliveOfIndia

ike2112 said:

CliveOfIndia said:

ike2112 said:

One of the credit check companies, I think Credit Karma, states that using less than half of your available credit is a positive for your credit scoring.

It may well be a positive for your credit score.  But since your credit score is utterly meaningless and is not even seen by any lender, that matters not one jot.

The general rule of thumb is that long-standing well-managed lines of credit are good for your credit history - which is what matters.  But aside from that, just choose a card that gives you some form of reward that's of value to you, whether that be airmiles, cashback, Clubcard points, whatever.

Whatever you do in terms of closing cards or opening new ones will make your score drop - but that's of no consequence at all.  Your ability to obtain credit will depend on the data contained within your credit history, as well as debt/income ratios.  It doesn't matter what percentage of available credit you're using as long as you're repaying in full every month - it only becomes an issue if you're carrying a balance from month to month.

And I think your last sentence is what concerns me.  I don't repay in full every month.  I do on the TSB card, and I normally do on the Tesco and AMEX card, other than 2 occasions where I paid too low an amount or when I actually forgot to make the payment at all (somehow I didn't have the minimum DD set up, .and did not realise).  The Virgin card is a 0% balance which I do not pay off any more than around £200 a month at the moment.
Its not clear how much that will impact my ability to apply for another card and sort this little mess out.

OK, so a couple of points.  If you usually clear the interest-bearing cards in full each month, that's a great start.  Not clearing in full occasionally is not a big issue as far as your history goes - although, of course you'll pay interest.  It's when you pay only the minimum for months on end that it really starts to affect you - the implication being that you're struggling to repay what you owe.  Missing a payment is obviously not great, but one error in an otherwise solid history is not the end of the world.

Don't worry about the Virgin card.  If it's on a 0% promotion then that fact will be marked as such on your credit record, so only paying the minimum (or at least, not repaying in full) is expected behaviour, so that won't count against you.  Obviously, you do need to make sure it's cleared by the time the promotional rate expires.

Hope this helps.