I have a relatively new Halifax credit card I don’t really need (it wasn’t as helpful as I thought it was going to be when I opened it). It has a rather high limit.
In the near future, I will be looking to open a new credit card from one of those with 0% for X months for home repairs/improvements, so it will have to have as high a limit as possible and I want to be in the best position to do that.
With regards to credit scoring, do you think it’s better to close the Halifax card down completely, or reduce the limit to something tiny and keep it open?
I have other, very old accounts with high limits so I don’t need to keep it open to show account age or high limits, and my credit score is very healthy.
Is one option better than the other, or would it not make a difference?
I’d just close it if you think your current limits might prohibit you from getting new credit. Low credit limits can also been seen as a negative. But only the banks themselves will know for sure…
Each bank has different criteria so it’s not a one answer fits all. Generally though they’ll look at what available credit you currently have when factoring in a new credit application. So if you’ve for loads of credit available it could potentially go against you, as it’s all money you could soon use up to end in debt. But then another bank may look completely different at that.
About 6 months ago I did a refresh of my credit cards - changed my Barclaycard to a different flavour, and replaced a Lloyds credit card with Amex.
My Lloyds never got used and was there as a ‘just in case’, albeit had quite a decent limit.
I closed my Lloyds at the same time as opening Amex, and it appeared the main thing that hit my credit score (I know these are made up) was the hard credit check and opening of a new account, which was back to normal in a couple of months.
Closing the old one had no effect that I could determine.
Obviously if this was my only card with a repayment history I’d have had second thoughts about doing this and would have kept it open for a while longer. However as I could rely on my Barclaycard’s payment history, I figured it would be fine.
TL;DR: I just did what I wanted to do and it didn’t matter.
Cool, so far I gather that:
- keeping the card on a high limit is likely to hurt future credit card applications
- keeping the card on a low limit might hurt future credit card applications with some providers
- ditching the card will have no adverse effects
I will close it and move along
Exactly this - From a credit scoring point of view, closing the credit card may be better for some lenders, leaving it open or reducing the limit may be better for others - it’s impossible to tell!
If you’re never going to use it again i’d just close it and move on as you said Ignore any impact it may/ may not having on your credit file because any impact it has will be negligible and will be different depending on the lender (given what you said about having other credit cards that have been open longer).
In general don’t worry about the impact things have on your credit file - It’ll be different for every lender - just do what’s best for you financially