Zero-balance Credit Cards

Zero-balance Credit Cards

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Discussion

Mr Happy

Original Poster:

5,694 posts

219 months

Saturday 21st February 2015
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Do zero-balance credit cards have a negative effect on your credit score or credit worthiness? Or, more accurately - will having a large available credit pool cause lenders to say no?

I've looked around the net but come to no real consensus yay or nay. Some people say it shows that you're a good credit prospect and can handle money well, others say it puts the willies up the credit firms because you could go rogue, max out all your balances and do a Reggie Perrin with the proceeds.

I'm tempted to phone up the various banks and cancel them off, however I don't want to cut my nose off to spite my face (so to speak) if it means obtaining credit in future if required is going to be more difficult.

Nickbrapp

5,277 posts

129 months

Saturday 21st February 2015
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no.

lots look on the percentage of credit you use, so say you have £10k from various company's and use 1k, that's only 10% and if you had 2k to your name and used 1 that would be 50% and look worse.

or at least that's how its been explained to me. unless they think you will go off the rails and run up a mountain of debt you cant ever pay back.

i have about £12k available to me, using 1200 and have a excellent credit rating according to equifax.

i think its more important to be up too date with your payments

Lozw86

871 posts

131 months

Sunday 22nd February 2015
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They say it is good to pay off your card in full every month.. which leaves the balance at zero

rossub

4,400 posts

189 months

Sunday 22nd February 2015
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Lozw86 said:
They say it is good to pay off your card in full every month.. which leaves the balance at zero
Not necessarily. That means it costs the card providers money to have you as a customer! Why would they bother giving you credit if they lose money on it?

Fun Bus

17,911 posts

217 months

Sunday 22nd February 2015
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Because they'd make money on their customers who incur interest or other charges each month.

L1OFF

3,360 posts

255 months

Sunday 22nd February 2015
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Fun Bus said:
Because they'd make money on their customers who incur interest or other charges each month.
They also make money from the retailer taking the credit card payment.

Mr Happy

Original Poster:

5,694 posts

219 months

Sunday 22nd February 2015
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We aren't just talking one card here though, I have several.

tim0409

4,355 posts

158 months

Sunday 22nd February 2015
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I've got 8 cards with a £63k limit - I didn't plan it this way but financed the last stages of my self-build with 0% cards and kept moving the money around depending on the offers until I mortgaged the property. It doesn't seem to have any impact on my credit rating. I am really careful about paying everything on time though.

Edited by tim0409 on Sunday 22 February 18:55

Mr Happy

Original Poster:

5,694 posts

219 months

Sunday 22nd February 2015
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Excellent, thanks Tim - the mortgage bit was what concerned me.

Many thanks smile

ChrisNic

592 posts

145 months

Sunday 22nd February 2015
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As I understand it the credit reference agencies simply hold information, lenders then ask questions to these agencies about people that have applied to them and base their lending decisions upon the answers to the questions. Different lenders, different questions, different results.

I tend to employ a very straightforward view to credit worthiness, would I lend this money if it were mine. In this scenario if someone asks for another 5k in available credit but I know they already have 20k available to them and it is unused I would start to ask questions why - if they only have only 5k of well managed credit available I would personally be more likely to say yes.

Far from scientific but it doesn't appear to have put me in bad stead with regards to obtaining credit myself.

Mr Happy

Original Poster:

5,694 posts

219 months

Sunday 22nd February 2015
quotequote all
If a lender asked me that question - I'd say that although the credit was available, the use of it would be prohibitive due to APR, hence shopping around for better deals from lenders.

In reality though, all of the times I've applied for credit, it has been on a computer says yes, or computer says no basis. I've never had to state my case and never had a lender query my personal circumstances. This is why I've asked the question as even on here there are conflicting opinions!

Some say that it does, some say it doesn't... Could it be classed as irresponsible lending by affording credit to people with a large amount of credit already available to them? If that person then went rogue, maxed everything and skipped the country (for example), would it be down to the lender to explain why?

Conversely, if someone was using 95% of their available credit - even if it was only £950/£1000 - would it be irresponsible of the lender to afford that person more credit being that they're already at their max and they're essentially being given a bigger hole to climb into?

At the minute, I'm probably using less than 5% of my available credit, so I think once it is cleared out completely, I'll close off some of the more pointless cards (ie ones with low limits, or ones that don't give anything back for using them) and just keep hold of the high-limit and loyalty cards to use in case of emergency or for online purchases etc.

After_Shock

8,751 posts

219 months

Monday 23rd February 2015
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rossub said:
Not necessarily. That means it costs the card providers money to have you as a customer! Why would they bother giving you credit if they lose money on it?
Bingo, if you keep even a small balance on the odd month and then pay it off the next so they can see they have made a bit from you it actually improves your rating or the willingness of them to lend to you.