Reducing credit limits

DuncanHart

I had a search on this topic and I found answers from a decade or more ago, so thought I’d seek an up to date view.

i have two credit cards , an Amex with a limit of £38,000 and a Mastercard with a limit of £50,000. I had these high limits back when the Inland revenue allowed you to pay your tax bill with a personal credit card, and I benefited from millions of air miles over the years.

that was all stopped a long time ago, I’ve continued to use each card but never more than about £6,000 max and always paid off each month in full.

I’ve often hovered over the ‘reduce limit’ button but had a nagging feeling it was a potential negative. Obviously with no balance my ratio is never troublesome , and I have no other debt other than a mortgage.

i trust myself not to spend on them and i lock them down against foreign purchase unless im abroad and no atm usage, or online purchases in categories I don’t use, so fraud risk is low (but obviously not nil).

is there any disadvantage to lowering the limit? My fixed rate mortgage comes to an end in three years time, should that make any difference (either for or against its reduction)

what do we think ?

Isthisforreal99

Various school of thoughts on 'available credit' being a negative as you could gp out tomorrow and max them out. Personally I haven't found it an issue.

Most relevant factor would be your income. Earning £30k with your level of available credit would be more of an issue than if you earn £200k

Altior

It's not material either way. If you never plan to use the liability again, there's no value in retaining it.

For me I'd say the very small risk of being a victim of fraud/theft means it's probably worth it to reduce the limits.

flaneurs_lobster

Can I ask the OP, do you happen to know what your credit score is?

I'm well aware that it/they are a meaningless marketing tool but I'm curious how they "score" such a large unutilised proportion of available credit.

DuncanHart

I use credit karma and my score there is about 675 - although it thinks I’m not on the electoral roll, but I am, so that I think may make the score lower than a credit company would assess me.

I’ve a couple of options - I could bin one card, but I like the Amex for its perks but it’s not as universally accepted , so gut feeling is to half the limit on each.

DuncanHart

sorry, I should have said - the usage is interesting as to get to even 1% is very rare, but if I do, it adds a couple of points. If I’m at 0% utilisation it goes down by about 10 points

la531983

https://forums.moneysavingexpert.com/discussion/comment/81924149#Comment_81924149

Its a good job it is utterly meaningless then.

MyRealNameToo

Each lender comes up with their own criteria and virtually everything can be seen in both positive and negative lights. In this day and age with things being calculated by powerful computers and not underwriters with slide rules they can have much more complex rules that take multiple factors into account at the same time.

Certainly some may have concerns that you go out and max the cards out but at the same time others like to see that people trust you with high limits and you have operated them appropriately for a significant amount of time.

What's the obsession with the credit score about? Are you anticipating the need to get a significant credit line in the near future where this may impact the probabilities? I'd probably stick to the status quo unless you have a good reason not to.

flaneurs_lobster

What's the obsession with the credit score about? Are you anticipating the need to get a significant credit line in the near future where this may impact the probabilities? I'd probably stick to the status quo unless you have a good reason not to.

TBF, the OP didn't mention credit scores at all, that was me. Just curiosity about how the (made up) scores treat very high limit/very low utilisation.

HillStreetBlues

https://forums.moneysavingexpert.com/discussion/comment/81924632#Comment_81924632

And mentioning it is hardly classed as an obsession!

Brie

If you have a very high income and might decide to book a round the world cruise then having a high limit may be a good thing. But if you have a high income and a low limit chances are the card providers will be happy to raise your limit for a particular purchase. If you have a low income and reduce the limits the providers are unlikely to raise them for you in the future.

Again with a low salary and high limits the bank might suggest you lower the limits before offering you a decent remortgage rate.