Credit Rating - Closed my credit cards

[DJMK4]

Hi all,

Just a quick question around this, even though I have cleared my credit card debt, and closed the cards, in an effort attempt to prepare for a mortgage, my credit score has gone up, however on the report now it is showing a negative as

"You have no active credit card accounts"

is this anything to worry about ? I know closing could possibly have a negative point, but im trying to show iv used cards in the past, paid them off, I am now closing them, as I want to prepare for a mortgage, and essentially not re-use cards.

 

[On Holiday]

Can't comment on it affecting mortgages but I do know that having a credit card and leaving on 0 balance and not using it is still better than not having one.

I'd get another on 0% with the lowest credit available possible to prevent temptation and either not use it or just use it for petrol or something - some cards offer reward points for this.

 

[Sliver]

I wouldn't worry. If you aren't in any form of debt then there is no reason for lenders not to lend to you, proving of course you have a sustainable income.

 

[Freakbro]

Why would not having a credit card help you prepare for a mortgage?

If you just bought the normal monthly stuff you would pay for anyway, food fuel etc, and clear it at the end of the month then you still have an active credit history

But I can't see it having that much of an adverse effect on your mortgage application, where I assume they are more concerned about your affordability to repay the mortgage

 

[Rifte]

I have a couple of cards, zero balance on one ( I never use it), and another one which I use and clear off every month.

It shows I can manage debt properly. Also it shows that I use a very small amount of the credit that I have available to me. (i.e I done rely on credit month to month).

 

[wingman]

Nothing to worry about particularly, you shouldn't have closed them all (maybe kept one or two open at best), but that's done now.

How close are you to getting a mortgage? I assume if it's imminent then it wouldn't be worth applying for a credit card now as you'll do more harm than good with it, in the first month or two, thanks to multiple applications for credit.

 

[DJMK4]

My income is fine, I closed them off because a) I don't want to use cards at the moment, and b) those particular cards wouldn't have been of any use product wise anyway.

If I want to borrow money, I will use it from another source, IE savings or other.

 

[Kenai]

I specifically took out a credit card in order to be able to demonstrate I could responsibly utilise credit etc. prior to getting a mortgage. Got no idea if it made a blind bit of difference, my FA didn't seem overly interested in it.

 

[DJMK4]

Fair enough, ill have a bit of digging around the internet to see what the general thought is, seems like it doesn't really make much different though.

 

[VincentHanna]

I have a couple of cards, zero balance on one ( I never use it), and another one which I use and clear off every month.

It shows I can manage debt properly. Also it shows that I use a very small amount of the credit that I have available to me. (i.e I done rely on credit month to month).

As far as credit scores go, this is the best way to do it.

It means that at any one time when they check, you are only using a small percentage of the credit available to you, and that looks good to lenders.

I have 4 credit cards, and only ever use on regularly and pay it off every month.

The others were mainly taken out for cheap 0% finance on balance transfers and are all paid off, plus I have a Halifax Clarity card that I only use in Europe.

 

[Kenai]

Fair enough, ill have a bit of digging around the internet to see what the general thought is, seems like it doesn't really make much different though.

This was the sort of stuff I was reading, from MSE

Carefully manage your available credit
This is all about how much credit you have available to spend on credit cards and overdrafts. It's the difference between your combined debit balances on your cards and bank accounts and your combined credit limits/overdraft limit.

You need to strike a balance between not having too much — as lenders may think you could rack up more debt by spending it all — and not getting too close to your limits, which makes it seem you're at the edge of your finances.

Credit agency Experian says that if you have debts, lenders prefer that they make up less than half your available credit. So if you've a combined limit of £10,000, they'd rather you use less than £5,000 of it.

If you are using a decent proportion of your available credit, avoid lowering your limits so you're suddenly close to the edge. Similarly, don't have tens of thousands of pounds of available credit unnecessarily — new lenders get twitchy that you could suddenly be far more indebted than you currently are.

This is an art, not a science, and all lenders' views of how much credit you 'should' have differ. Try to stay below 50% in all cases. Of course, if you can pay off debt, you should do so.

Close old, inactive accounts or they can kill your application
If you're not using an account, it may be worth closing it. Leaving it open could not only be a fraud risk, but could also mean some of your details may need to be updated.

However, if applying for a mortgage, longer, stable credit relationships are a positive. So, if you've two credit cards, one recently opened and an older one, it's probably not worth closing the older one before the mortgage application as you could lose the credit score boost it gives you.

See the Should I Cancel? guide for full information on why you should (and shouldn't) close old accounts. If you are closing an account, just cutting up the card isn't good enough — you must tell the bank you want it closed.

 

[NVP]

I didn't have a credit card until recently and it is only for use abroad. Never caused an issue for any of my mortgages. You should be alright

 

[DarkHorizon472]

Lenders go by your credit score as well as other details. if you never use credit it means your credit score will be lower. If you continually use credit and pay it off properly you will have a higher credit score. Your credit score is effectively how well you manage credit. A good score makes it easier to get credit and also can open up better deals.

 

[DJMK4]

My score looks ok, 587, Average score in my area is 440 according to clear-score.

So options are: leave them closed for now, or open a new credit card (like I said the old card product wise were not suited for me anymore), I currently have £800 left on a black horse loan, so its not as if I am not showing that I cant use credit properly

 

[413x]

My score looks ok, 587, Average score in my area is 440 according to clear-score.

So options are: leave them closed for now, or open a new credit card (like I said the old card product wise were not suited for me anymore), I currently have £800 left on a black horse loan, so its not as if I am not showing that I cant use credit properly

That number is arbitrary. And which of the 3 providers is it from?

As said, probably won't make much of a difference but is best to have one active and one dormant, the active one paid off each month but used.

I have 4 myself

 

[VincentHanna]

Mines 999, and i'm not a wealthy man.

 

[paradigm]

The number is irrelevant, the data contained within the report, being correct, up to date, no anomalies and no adverse points (CCJs, defaults, etc) are the only important factors.

Any lender will have their own criteria and algorithms to determine acceptance for any product, the scores aren't even visible outside of the CRA I believe.

Most of the CRAs dont know your incomings and outgoings, which is the most important factor in affordability and therefore product acceptance.

 

[mattyg]

I got my Rating up to 999. By using a CCard to buy fuel and pay it off at the end of the month.

 

[Shoza]

I had a Tesco credit card for years which I used a lot until 2 years ago when I paid it all off. Went unused for 8 months and Tesco wrote to me to say they had closed my account as it wasn't being used - has affected my credit score at all.

 

[TheGentry]

As never having a credit card ever I was still able to get a mortage of £160k, my earnings aren't the highest ethier about 2k a month, they cared more about how much i could afford to pay after all my essentials were paid then if I've ever had debt and paid and such