Salary - Credit Limit ratio

lhwrandal

Have a general question on salary vs total credit limit.  My annual salary is approx. £86K with a total credit card limit of £120k across my 5 credit cards.  My utilisation is low as I usually cleared the balance right away.  No issue with my credit score but new card applications were declined most of the time lately (trying to get new cards for perks). 

Is my salary vs credit limit playing a role here?  Do I have to lower the total limit?

Thanks for the advice.

MorningcoffeeIV

Yes, it could be playing a role.  

Your credit score, on the other hand, has no impact on lending decisions.

sammyjammy

If you have £120k of mainly unused credit why would you want to apply for more?  Maybe reduce some of the credit limits on the existing cards.

Mark_d

lhwrandal said:

Have a general question on salary vs total credit limit.  My annual salary is approx. £86K with a total credit card limit of £120k across my 5 credit cards.  My utilisation is low as I usually cleared the balance right away.  No issue with my credit score but new card applications were declined most of the time lately (trying to get new cards for perks). 

Is my salary vs credit limit playing a role here?  Do I have to lower the total limit?

Thanks for the advice.

I would certainly suggest reviewing the credit limit on each card.  I would also suggest closing accounts if you don't use them regularly.

You want ample headroom to cater for any unexpected spending but ridiculously high credit limits just increases the risk, as a lender would see it, that you could get in to huge debt.

lhwrandal

I have two main cards which the limits increased over time (>£30K each), the other 3 are just supermarket and point cards that offer shopping discounts and accumulate points, which has lower limits.

I came across another one with welcome offers which I am interested in.  I suppose if I don’t lower the limits on the other ones, it will be difficult to get new cards.

MattMattMattUK

lhwrandal said:

I have two main cards which the limits increased over time (>£30K each), the other 3 are just supermarket and point cards that offer shopping discounts and accumulate points, which has lower limits.

I came across another one with welcome offers which I am interested in.  I suppose if I don’t lower the limits on the other ones, it will be difficult to get new cards.

Lenders will look at your total borrowing capacity. Think about it this way, would you potentially lend more money to someone with the capacity to already run up £120k overnight? If you make out your current borrowing the interest would likely be in the £35-40k pa range, around two thirds of your net income. 

Mark_d

lhwrandal said:

I have two main cards which the limits increased over time (>£30K each), the other 3 are just supermarket and point cards that offer shopping discounts and accumulate points, which has lower limits.

I came across another one with welcome offers which I am interested in.  I suppose if I don’t lower the limits on the other ones, it will be difficult to get new cards.

If the highest bills on your main credit cards have been up to around £5k then I would suggest reducing these limits to £15k each...unless you think you might splash out on something expensive like a new car.  Having unnecessarily high credit limits can only count against you when applying for credit

MrFrugalFever

I would say access to 50% of your total gross income in credit card limits would be sufficient for most and would it would be less likely to deter lenders from accepting your applications. I personally am at around this figure now and have to say wouldn't feel comfortable with access to much more (even though i'm disciplined enough to not use anymore than I can afford). I know that I could access quite a bit more from eligibility checks (certain high street banks will give you indicative credit limits before actually applying).

I have considered closing down one or two accounts that I rarely use (maybe like £10pm on just to keep live) but they are currently providing me with good historical data so will leave for now.

born_again

lhwrandal said:

Have a general question on salary vs total credit limit.  My annual salary is approx. £86K with a total credit card limit of £120k across my 5 credit cards.  My utilisation is low as I usually cleared the balance right away.  No issue with my credit score but new card applications were declined most of the time lately (trying to get new cards for perks). 

Is my salary vs credit limit playing a role here?  Do I have to lower the total limit?

Thanks for the advice.

You total available credit is far higher than your income.
A lender will see that & think, sorry but that you are a too bigger risk.

Nasqueron

When you say you pay off CC spend straight away, do you mean before the credit card statement is made or after? If the former, it makes it look like the card is never used which will affect how lenders see you when they do a credit check (based on the data, not the fake score) - having lots of credit and looking like you are never using it is not good for building a good credit history

That said, with so much credit available vs salary, (any other debts also e.g. PCP, mortgage etc?) it can look bad to lenders

lhwrandal

Nasqueron said:

When you say you pay off CC spend straight away, do you mean before the credit card statement is made or after? If the former, it makes it look like the card is never used which will affect how lenders see you when they do a credit check (based on the data, not the fake score) - having lots of credit and looking like you are never using it is not good for building a good credit history

That said, with so much credit available vs salary, (any other debts also e.g. PCP, mortgage etc?) it can look bad to lenders

Yes, in fact I do pay off before the statement is generated…so my credit report shows zero balance most of the time.  I do not have other outstanding debts.  Didn’t know it can look bad for lenders.