Finally cleared my credit card balances... but now what next?

trfc20222

Today is a big day as after much planning, scraping and changing of habits I finally paid the last of my credit card balances off!

This means that as it stands I have 7 active cards with just over £15,000 available on them.

I realised that although I have spent a great deal of planning and fretting on how to get the balances down that I haven't really prepared for what to do now that I am here

My question is as follows, from a credit score perspective what I am best to do with the following:

• Do I keep them all open or close them?
• If I keep them open am I best to leave £0 balances or pay say £100 on each every month and then clear them?

Any advice appreciated

The_Groat_Counter

https://forums.moneysavingexpert.com/discussion/6679221/finally-cleared-my-credit-card-balances-but-now-what-next

The actual 'credit scores' the CRAs hand out are meaningless (only you see them), so don't waste your effort being a slave to their nonsense.

Your credit record / history is what matters to lenders… but again even this isn't that crucial if you're not wanting to have money lent to you. Are you likely to apply for a mortgage in the near future? If not, don't worry.

Most important thing is to not get into a mess again. If having a mass of available credit might be too much of a possible temptation, then close most of the accounts down.

ManyWays

I suggest you keep one; more than that is unnecessary for your credit score and leaves a crack open for identity theft.

I suggest choosing one with a sensible limit, not 300, not 6,000. And a low interest rate (not that you intend to ever pay any, but just in case). If there are several candidates, choose the oldest account.

Close the others all immediately, this is a temporary hit to your credit score so get it out of the way, it will recover in a few months.

And use the remining card once a month for something small, less than a quarter of your limit, and set the card to be repaid in full by direct debit.

(It is true that lenders do not see the credit score you see. However CRA scores are a rough approximation of what many lenders are interested in, so they are not meaningless. )

Smudgeismydog

I’d second closing all except one, and keep the only card for small purchases, which you pay off in full each month.

The_Groat_Counter

https://forums.moneysavingexpert.com/discussion/comment/82096630#Comment_82096630

(It is true that lenders do not see the credit score you see. However CRA scores are a rough approximation of what many lenders are interested in, so they are not meaningless. )

That's a considered and well worded rejoinder to my earlier comment about the credit scores. I'm a bit torn with how to describe them… in a recent thread post I did describe them as "fairly meaningless", which was countered with the comment that they are "completely meaningless".

I guess I've just increasingly come across people who mention their credit scores in a way that seems far too reverential, as if it relates to their self-worth as a person! Plus I seem to be seeing more advertising about credit scores (e.g. this Experian "Better your score. Better your story." TV advert). I just think it's misdirected mental energy to be beholden to these firms who have a obvious financial interests in hooking people into being exercised about their 'score'.

twopenny

Congratulations 👏🎉😃

By using them overmuch you are just constantly paying them off out of your current money leaving you hard up every month.

Pay them off in full if you do use them and know you'll have the surplus at that time.

I keep 2 for travel (in case one gets blocked) and have enough credit with them to get travel home if there's some disaster like the ash cloud - and that's it.

Having 7 sounds like too much temptation to spend what you haven't got.

YBR

https://forums.moneysavingexpert.com/discussion/comment/82096741#Comment_82096741

Yes, I'd keep 2 open if travelling, as sometimes they get blocked just when you've fewer other options. Close the rest of the accounts.

In terms of new financial targets, the things to consider next might be what savings do you have, and how healthy is your pension, and do you have a mortgage you might like to over-pay?

Dobbibill

I think 7 cards is excessive so a vote here to close most of them.

I would probably opt to close all but 2 (maybe 1 visa & 1 mastercard for any system outages by either) then set up a direct debit to pay off in full and use for daily living such a groceries and fuel/other travel costs. This will keep them ticking over and demonstrate you can handle credit sensibly.

Well done on clearing the outstanding debt.

I agree with above - now it's time to focus on savings, pension and mortgage overpayments (if applicable).

Emmia

I'd close all but 1 or 2 as others advise. I wouldn't use the cards for everyday spending like groceries though, what I would do is shift a monthly payment like a gym membership (if you have one) onto the card and then have a direct debit set to pay that off in full every month. It is a payment you already make, with a predictable value.

Grocery costs vary and it can be easy to spend more than you intend.

trfc20222

Thank you everyone,

Some really good advice in there

I think I will keep two as others have said, the plus for me is that because I changed a lot of what I did - and cleared a lot I was spending on out - Sky etc, I ended up paying around £600 a month to the credit cards to get the balances down. My plan was to just carry on with the same mentality and flip that into savings. I was already putting in £400 a month so to up it to £1000 a month effectively

twopenny

That's a lot for savings but if you can do it, go for it. At least the money is yours.

I agree with one Visa and one MasterCard. I've done that too for a similar reason.