Should I cancel unused credit card?

[anonymous-user]

I am just about to apply for a mortgage and have made a few mistakes which have adversely affected my credit rating:

1. Made a recent big purchase. Bought a second motorbike, I was going to pay outright but they offered me 0 percent finance and wouldn't offer me discount (even to match base level interest of 2 percent) so it was a no brainer. I have been told this would of knocked a few points off.
2. I have moved around over the last 5 years and not registered anywhere.

I have never had a bad mark put on my credit history, never missed a payment for anything and I earn 'good' money. But my credit score has dropped drastically over the last 5 years. Last time I checked I had a score of 730 and now its down to 600.

I am looking at ways to try and quickly improve it, as I have a few months. So far I registered on the electoral register and im contemplating cancelling a credit card that I rarely use (has a £10k limit and is just sat there not being used) Will this have a positive or negative effect on my rating?

The mortgage advisor has said my 'gleaming payment history' will have more of an effect on the mortgage rather than the score itself, but I am unsure.

Cheers

[Shaoxter]

Get a one month free trial from Experian or similar.

Cancelling a credit card with a big limit will negatively affect your rating. All your credit card limits are added together and it's better to have a £1k debt on a £20k limit than £10k. Also note that even if you pay off in full by direct debit each month, your monthly bill will show as a "debt".

[williaa68]

Agree. Keep the card. Try and stay put and make sure you are on the electoral role.

[anonymous-user]

Thanks for the response. I have paid for a years account on Noddle - where I get new releases each month including my credit score.

I have just been added to the electoral role. I have another credit card with a 9k limit with a few grand on, which again is interest free, so never bothered to pay off as would rather have cash in the bank. I am going to pay that off this afternoon. Apart from that I have no 'debt' (obviously apart from the second bike on HPI)

The bank said to close the other card off, but I have read elsewhere (much like your response) that its better to keep it as it also shows that I am 'trusted' with a reasonable limit and that I have always kept up payments etc.

Hmmmmm

[P-Jay]

I'm sorry I can't give you an answer, because there isn't a clear one - it will depend on how close to perfect you are on credit history verses affordability. Some underwriters can get a bit jittery about large unused credit limits if you're close to affordability limits in case you go mad in John Lewis for stuff for your new place with Barclaycard, they usually better than that though.

I just rambled on, on another thread trying to debunk a few myths about credit reports.

http://www.pistonheads.com/gassing/topic.asp?h=0&a...

[anonymous-user]

P-Jay said:

I'm sorry I can't give you an answer, because there isn't a clear one - it will depend on how close to perfect you are on credit history verses affordability. Some underwriters can get a bit jittery about large unused credit limits if you're close to affordability limits in case you go mad in John Lewis for stuff for your new place with Barclaycard, they usually better than that though.

I just rambled on, on another thread trying to debunk a few myths about credit reports.

http://www.pistonheads.com/gassing/topic.asp?h=0&a...

Thanks, I had just read that actually. It is all a mystery to me really and I would love to see a good set of rules which outline what does effect your rating. The Limits IMO are not out of touch with my affordability at all. The house I am buying is 1/3rd of my affordability limit so should not be a problem at all.

I cannot do much more then clear my credit card off and sit tight with my fingers crossed and hope it goes up I guess.

Part of me is hoping that the mortgage application is handled by a person who can look at salaries, payment history and affordability to make an educated decision instead of going on a number that looks like its been plucked out of the air!

[Alfa numeric]

It's not exactly the same as your situation but when I was organising a personal loan with Sainsburys bank in 2011 they increased the interest rate by 1% late in the process. They told me that this increase was due to the fact that I was a slightly higher risk as I had 5 credit cards. Three of them are never used and none of them have balances on.

[P-Jay]

yammyfan said:

P-Jay said:

I'm sorry I can't give you an answer, because there isn't a clear one - it will depend on how close to perfect you are on credit history verses affordability. Some underwriters can get a bit jittery about large unused credit limits if you're close to affordability limits in case you go mad in John Lewis for stuff for your new place with Barclaycard, they usually better than that though.

I just rambled on, on another thread trying to debunk a few myths about credit reports.

http://www.pistonheads.com/gassing/topic.asp?h=0&a...

Thanks, I had just read that actually. It is all a mystery to me really and I would love to see a good set of rules which outline what does effect your rating. The Limits IMO are not out of touch with my affordability at all. The house I am buying is 1/3rd of my affordability limit so should not be a problem at all.

I cannot do much more then clear my credit card off and sit tight with my fingers crossed and hope it goes up I guess.

Part of me is hoping that the mortgage application is handled by a person who can look at salaries, payment history and affordability to make an educated decision instead of going on a number that looks like its been plucked out of the air!

You have nothing to fear, honestly based on the info above you're not going to run into bother because of a couple of grand here or there.

I know how you feel, but honestly the maths behind credit scoring is quite unbelievably complex - but you have to keep in mind, whilst no one has the right to credit, the lenders are in the business of selling credit, they're not guardians of their depositors money.

The likelihood is that the only real person who handles your application will just involved in data entry, very very few people are trusted to make yes / no decisions anymore, not because they can't be trusted, but because you can never get 2 people to do the same thing, in the same way every time and without that you cannot successfully write credit policy.

[bugmenot]

Just to add, your "credit score" of 730 and 600 with Experian doesn't really mean anything. Experian are not lending you anything and at best the score they give you is a guide to how lenders will assess you.

Individual lenders will generally have their own scoring systems and ways to assess your circumstances. These will based (amongst all the other information they have about you) on the actual data/information within your credit report rather than the score Experian gives you.

Edited by bugmenot on Thursday 24th April 23:56

[Sarnie]

bugmenot said:

Just to add you "credit score" of 730 and 600 with Experian doesn't really mean anything. Experian are not lending you anything and at best the score they give you is a guide to how lenders will assess you.

Individual lenders will generally have their own scoring systems and ways to assess your circumstances. These will based (amongst all the other information they have about you) on the actual data/information within your credit report rather than the score Experian gives you.

^^ This.

I've had so many clients tell me that their scores with X,Y,Z credit referencing agency is 999 or 'excellent' only for the AIP to be declined. They send the credit file and they've missed payments on credit cards or similar in the last year etc etc.

Lenders decisioning systems are wholly automated these day and they will have certain parameters such as "no missed payments within the last 12 months". Search of the credit file detects the missed payments = declined AIP.

Long gone are the days of a human having an input or an influence into the decisioning process.

Credit referencing agencies have built an industry on peoples paranoia about their credit file. They dish out these scores which are ultimately meaningless.

In the main the only thing you can do to improve your chances are to get added to the Electoral Roll and try to maintain consistency in your employment, address and credit repayment history, all of which take time.

[anonymous-user]

Sarnie said:

^^ This.

I've had so many clients tell me that their scores with X,Y,Z credit referencing agency is 999 or 'excellent' only for the AIP to be declined. They send the credit file and they've missed payments on credit cards or similar in the last year etc etc.

Lenders decisioning systems are wholly automated these day and they will have certain parameters such as "no missed payments within the last 12 months". Search of the credit file detects the missed payments = declined AIP.

Long gone are the days of a human having an input or an influence into the decisioning process.

Credit referencing agencies have built an industry on peoples paranoia about their credit file. They dish out these scores which are ultimately meaningless.

In the main the only thing you can do to improve your chances are to get added to the Electoral Roll and try to maintain consistency in your employment, address and credit repayment history, all of which take time.

Thanks for the information there Sarnie, appreciated. That is basically what the mortgage advisor said. The checks are different and don't just look at a score and say no. I think deep down I will be fine, I am just flapping.

I have had loans and things in the past which have all been paid back and there is not one red mark/missed payment on my credit file - Will update when Ive been approved/declined my mortgage at the end of June

In the mean time I will keep my credit card open.