Voluntarily reducing credit limit

snack_shack
snack_shack Posts: 7 Forumite
First Post Combo Breaker First Anniversary
in Debt-free wannabe
Hi there. I've never posted on the forums before so I hope this is the right one.


I'm at the point where I really need to get a grip on the finances. I have 2 credit cards and I'm struggling with the repayments on both but luckily I have not missed any payments yet. Both credit card companies have increased my credit limits periodically without asking me first and I have just let it happen. One of which has been increased so much it's only £1k less than my annual salary! Thankfully I am nowhere near my limits on either but I want to recuce the limits on both of them as I feel it's detrimental to have so much credit available to me via credit cards, especially when I'm already struggling. It's too tempting to have that credit available to me - especially near Christmas time.



I wanted to ask if voluntarily reducing my credit limits is a good idea as I've just read an article saying that this kind of action could harm my credit rating rather than improve it.


Any advice would be welcome.


Thank you.

Comments

  • sammyjammy
    sammyjammy Posts: 7,373 Forumite
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    I think that advice applies if you reduce the credit limit to say £5k and your balance on the card is currently £4.5k because it looks bad if you are close to your credit limit so reduce it just not too much!
    "You've been reading SOS when it's just your clock reading 5:05 "
  • Dobbibill
    Dobbibill Posts: 4,134 Ambassador
    First Anniversary Mortgage-free Glee! Name Dropper First Post
    Your credit file will not state which party reduced the credit limit - it will just be reported as a new limit.

    It's a balancing act getting your limits where you want them and not exceeding too much utilisation of credit as the previous poster points out. Eg - £1000 credit limit with a £900 balance is 90% utilisation whereas £10000 credit limit with a £900 balance is 9% so a much lower utilisation of available credit in the second example.


    Get a happy balance and if you are tempted coming up to Christmas then lock them away or cut them up. Don't get into to debt for Christmas - it's one day (the people who matter won't mind and the people that mind don't matter ;) )
    I’m a Forum Ambassador and I support the Forum Team on the Budgeting & Bank Accounts, Credit Cards, Credit File & Ratings and Energy boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.

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  • beanielou
    beanielou Posts: 90,176 Ambassador
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    Good advice on Christmas.
    I am a Forum Ambassador and I support the Forum Team on Mortgage Free Wannabe & Local Money Saving Scotland & Disability Money Matters. If you need any help on those boards, do let me know.Please note that Ambassadors are not moderators. Any post you spot in breach of the Forum Rules should be reported via the report button , or by emailing forumteam@moneysavingexpert.com. All views are my own & not the official line of Money Saving Expert.

    Lou~ Debt free Wanabe No 55 DF 03/14.**Credit card debt free 30/06/10~** MFW. Finally mortgage free O2/ 2021****
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  • snack_shack
    snack_shack Posts: 7 Forumite
    First Post Combo Breaker First Anniversary
    Thanks for the replies. I totally get sammyjammy's comment about a reduction in the credit limit would be more detrimental if we reduced it to pretty much the current outstanding balance. That makes sense and hadn't occur to me.



    I definintely also need to discipline myself this Christmas and get the comments on that also. I've never gone crazy mad but I do overspend and I need to get a grip on that. It's a domino effect.



    Thanks again :)
  • theoretica
    theoretica Posts: 12,293 Forumite
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    A reduction in credit limit may slightly reduce your credit rating, but it will be much less detrimental than succumbing to the lure of available credit.

    Also, the effect will be short term - if you don't want to take out more credit now do what is best for you for paying it off.
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
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