I currently possess three separate credit cards, one has a balance of around £50, the other two have zero balances. This came up in conversation recently and the guy I was talking to reckoned that I’d be better off closing the two “inactive “ accounts because having a credit card and not using it can negatively affect my credit rating. Is this true?
the maoster:
I currently possess three separate credit cards, one has a balance of around £50, the other two have zero balances. This came up in conversation recently and the guy I was talking to reckoned that I’d be better off closing the two “inactive “ accounts because having a credit card and not using it can negatively affect my credit rating. Is this true?
The “Guy” you were talking to was talking out of his arse as the opposite is true, if you close the credit card accounts it will negatively impact your credit score.
What’s a credit rating when its at home?
Unless you require a mortgage, ie to borrow some money to put a roof over your head(s), arguably a poor credit rating might be a good thing to have.
Grumpy_old_trucker:
the maoster:
I currently possess three separate credit cards, one has a balance of around £50, the other two have zero balances. This came up in conversation recently and the guy I was talking to reckoned that I’d be better off closing the two “inactive “ accounts because having a credit card and not using it can negatively affect my credit rating. Is this true?The “Guy” you were talking to was talking out of his arse as the opposite is true, if you close the credit card accounts it will negatively impact your credit score.
I must admit that was my suspicion too.
Juddian:
What’s a credit rating when its at home?Unless you require a mortgage, ie to borrow some money to put a roof over your head(s), arguably a poor credit rating might be a good thing to have.
Well I’m at the stage where if I can’t pay it from my current account I don’t buy it. I have kept the two dormant cards going though as they’ve both got £12k limits on them and my thinking was that if I’m abroad for example and some disaster befalls me then at least I’ve got access to some wiggle room as a last resort.
Yes we keep one card going but its mainly for online purchases which is cleared every month automatically, worth keeping going for the various assurances a credit card gives even if only part paying.
I have a account but no card , as the daughter has that just in case she has a large bill befall her , the balance was zero but I’m not sure how it’s possible but she ( I’d put my money on that boyfriend of hers ) managed somehow to spend £43 on a take away from the local chip shop , she’s worked hard , so I told her to have a night off cooking & get herself a take away , use the card , but not in my wildest dreams did I think she’d go chip shop ( that’s him ) & id of thought it would be impossible to spend £40 there , there again I’ve never seen anyone eat like he does , he picks the biggest meal & devours it then clears off every one else’s plate
I’m not really that bothered , £40 is nothing , but I’ll order there takeaways from now on , would love to know what he ordered
Grumpy_old_trucker:
the maoster:
I currently possess three separate credit cards, one has a balance of around £50, the other two have zero balances. This came up in conversation recently and the guy I was talking to reckoned that I’d be better off closing the two “inactive “ accounts because having a credit card and not using it can negatively affect my credit rating. Is this true?The “Guy” you were talking to was talking out of his arse as the opposite is true, if you close the credit card accounts it will negatively impact your credit score.
Actually having closing accounts can do your credit rating good. Having too much credit can make it harder to get credit even if they are not used. Your are better using 10% of the limit every month and paying it off. Or generally using a card for a lot of stuff and paying it off every month. Lenders like to see that people are jot afraid of larger lending amounts and paying it off. Of course your actual credit score doesn’t mean a lot in the real world as each lender usually has its own scoring system and the credit score is only one part.
The only negative I’ve got on experian is that I have no settled or closed accounts mainly because I’ve had nothing much on credit for a number of years.
Juddian:
What’s a credit rating when its at home?Unless you require a mortgage, ie to borrow some money to put a roof over your head(s), arguably a poor credit rating might be a good thing to have.
How do you figure that?
A poor credit rating doesn’t stop someone getting credit, they usually end up getting credit from the bad credit lenders at extortionate rates.
the maoster:
I currently possess three separate credit cards, one has a balance of around £50, the other two have zero balances. This came up in conversation recently and the guy I was talking to reckoned that I’d be better off closing the two “inactive “ accounts because having a credit card and not using it can negatively affect my credit rating. Is this true?
It kind of depends on what balance is available on them combined, and if they are not used with high balances then lenders would be less willing to lend to someone with say 3 large balances even though they are not being used.
Same goes for those without any credit think its better buying everything by cash.
Lenders like to see commitment from a lender, so they like to see some history and regular repayments.
Experian suggests closing any settled or unused accounts but again as I said it depends on how many and balances available.
simcor:
Juddian:
What’s a credit rating when its at home?Unless you require a mortgage, ie to borrow some money to put a roof over your head(s), arguably a poor credit rating might be a good thing to have.
How do you figure that?
A poor credit rating doesn’t stop someone getting credit, they usually end up getting credit from the bad credit lenders at extortionate rates.
If credit is more difficult to get it would help stop people lacking self control getting into serious debt far far worse than they can pay back, arguably our govts of the last 25 years could have benefitted from this lesson.
Grumpy_old_trucker:
the maoster:
I currently possess three separate credit cards, one has a balance of around £50, the other two have zero balances. This came up in conversation recently and the guy I was talking to reckoned that I’d be better off closing the two “inactive “ accounts because having a credit card and not using it can negatively affect my credit rating. Is this true?The “Guy” you were talking to was talking out of his arse as the opposite is true, if you close the credit card accounts it will negatively impact your credit score.
Grumpy is right. I closed one of my credit cards because I was not using it. Took a hit to my rating.
simcor:
Experian suggests closing any settled or unused accounts but again as I said it depends on how many and balances available.
What Experian would like to see above all, is lots of the population giving them £10 a month for access to their credit file.
And for the lender, the ideal borrower is one who spends a lot of money on high-interest borrowing (at least where this implies only inattention or lack of financial sophistication, not desperation or rank stupidity), doesn’t pose an administrative burden by routinely paying late (or defaulting), and has unliquidated assets which mitigate the risk of total non-recovery or bankruptcy.
Beyond that, I suspect it’s just like reading the tea leaves.
Different lenders have different models, and in some cases there may even be cross-subsidy. For example, if a bank has lent to a car producer who are struggling to shift their models of late, then the bank may also want to set up and capitalise a finance company offering preferential loans to consumers likely to buy that model, to ensure that the dealer forecourts are cleared.
Obviously it won’t usually be done so nakedly - the bank will go and talk to a finance company already on their books (who have no specific knowledge of the bank’s involvement in car production), and say “our market analysis shows there’s unmet demand for this car model, we’re willing to provide capital on preferential terms if you target your loans to this model”, and the management of the finance company simply say yes, because whatever they lose on the exposure to higher risk of consumer default, they gain on the terms offered by the lender of the capital.
The bank can maybe also then offload their exposure to that struggling car company, to a sucker who thinks the company is doing a roaring trade (and doesn’t know about the finance company set up to pump the market of late), or talk to the car plant management about their “forecasts for the market” and winding things down a bit to match the ‘natural’ (i.e. unsubsidised) level of consumers. Banks hire people to take advantage of possibilities like these, and as lenders they have preferential access to management and to intelligence from inside all kinds of businesses, whilst the public, the general class of businessmen, or even the state, has no such right of access.
So you might get a good deal on a loan not because your credit is great, but just because you’re considered for the time being to be part of some financial scheme which depends on you buying something or other in particular, the details of which you know not.
Responsible borrowers will always get loans on feasible terms, and trying to optimise your credit file is I suspect a fool’s errand.