Credit Cards and Credit Rating...what's best?

flossymcfly

Hi, I have recently taken out a debt consolidation loan with my local credit union as I was paying 39.9% on one CC and 49.9% on another. 

I have paid off the CCs quite a few times in the past but always run them up again. Really keen not to do that this time so trying to work out what's best to do without harming my creditworthiness. One CC is for £4900 and the other is just £800. 

If I was to close the £4900 and keep the £800 for emergencies, would this adversely affect my credit file? Or would it improve things if it was left open and not used? Not sure what to do for the best.

TIA

Grumpelstiltskin

The best thing to do is close your credit cards so you are not tempted to use them again.

What is the interest rate on the loan?

flossymcfly

It's 6.9% so a lot lower than the cards. 

Will closing them affect my creditworthiness? Is that looked down on by banks etc?

Mark_d

Creditworthiness is when banks are able to see that you can manage credit well.  That means you have credit facilities but always pay on time.

It looks like having credit facilities tempts you to use them.  It looks like you are not very responsible when it comes to spending money you don't have.  I agree that the best thing for you would be to close your credit cards.

Credit cards can be great for managing cashflow, protecting purchases, and earning reward points.  But credit cards are not free money and you should not be spending money you don't have/are not earning

Grumpelstiltskin

If you are worried by creditworthiness it sounds as though you are looking for more credit in the future.

You  are much better to work in cash - if you haven't got cash you don't have it.

Pay the loan off and save, you need at least 6 months wages in savings to stop you getting credit when something crops up.

easyasonetwothree

To resist temptation I would cancel the £4.9k credit card. If you wanted to keep some credit for creditworthiness, keep the £800 one, but cut up the card and remove the details from your online wallet etc. Then it's stays on your credit record even if your utilisation is zero. Every lender looks at your credit file differently so there's no way of knowing what would adversely affect it (except missed payments/defaults etc of course).

RAS

Do also bear in mind that the experience of several posters here has been that credit unions are MUCH stricter about non-payment than credit card companies. You cannot afford to miss payments with a credit union.

So if you've got even a tenner you can put aside, make sure that you have at least one month's credit union payment in a separate savings account you can access if absolutely necessary, and then build the emergency fund up.

One recent poster had multiple bank account closed or was rejected even for basic accounts. Her credit union had reported a fraud maker on CIFAS, and there was evidence that they did this frequently, although the regulator had previously overturned their action.

flossymcfly

Thanks everyone. 

In terms of future credit, I only meant for mortgage renewal etc, not for more credit cards. I just didn't know if it looked worse on your file that you had closed a card.

I do earn a good wage so no issues with missing payments (I've never missed a single payment in my life and always pay more than the minimum), but unfortunately went through a bout of severe depression and spending seemed to make things seem a bit better so I did...stupid I know. Out the other side now so trying to fix everything and get myself in order.

Thanks again for your responses

RAS

As long as you choose the best option from your existing provider, you can re-mortgage without a further credit check, so don't worry to much about that.

FluffyBabyPenguin

In my experience, closing a credit card does put some kind of action on your credit history, and it affected my "credit score" for a few months after I closed the card. However, those scores really don't mean much, especially if you were just renewing your mortgage with your current lender. A closed credit card on file would probably not be a concern to other lenders, it just depends how they evaluate things.