Will lowering our credit card limit affect our credit scores?

Dear James,

My wife and I are now retired and do not need the level of credit we now have on our joint credit card.  If we voluntarily reduce this level as a security precaution, will this adversely affect either or both of our credit ratings?

Malcolm, Camberley

Dear Malcolm,

A large unnecessary credit limit can be a worry, so I do understand your concerns. And as this is credit you have already been granted, another lender could see this as virtual debt and factor it into their affordability calculations. But it’s much more likely that this is actually helping your credit score at the moment. Most lenders carrying out a credit check will be encouraged to see that another lender has trusted you with a high credit limit. Their credit scoring is also likely to assess what proportion of your ‘revolving’ credit (usually credit and store cards) you are regularly using. For credit scoring purposes we recommend using no more than 25% of your credit limits if you can. So if for peace of mind you do ask the card provider to reduce your limit to a lower amount, make sure this is greater than four times your regular monthly spending.

Now, contrary to popular belief there’s actually no such thing as a ‘joint’ credit card. What you’ll find is that the card belongs to just one of you and the other will be nominated as a secondary card holder. While this allows the second person to carry and use a card, the account is in the primary cardholder’s name and only their credit report will include a record of how it is managed. As a result, the action you are proposing above could only affect one of your credit ratings directly. That said, if you are financially connected through other joint credit – maybe a current account, for example – then any significant change in one of your credit histories could still affect the other’s credit rating. If you use our CreditExpert service, the Experian Credit Score will give some good pointers on fine-tuning your credit behaviour to help maximise your attractiveness to lenders. (October 2014)


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