Too Much Credit History

You may be well aware that if you have a poor credit rating this can affect your ability to obtain credit, however many individuals remain unaware that by having too much credit history this can also affect your chances.

Information held on your credit report is designed to assist lenders in making a decision when you make an application for one of their products. When potential lenders search your credit report they have access to the details of any accounts that you hold and manage at present, any accounts you have closed so therefore no longer have access to, and any accounts you no longer use.

What a lender looks for is how reliable you have been in managing your accounts. A lender will normally interpret the following to mean;

 If you pay just the minimum amount you are required to make to keep your account in order - paying just the minimum every month means that you will end up paying more than what you should in interest. This can suggest that you may be spending more than what you can actually afford to repay.

 If you regularly exceed your credit limit - boundaries are put in place by credit card providers for good reason. If you regularly exceed the boundaries put in place it can suggest that you rely heavily on credit. Spending beyond your limit also means that you will likely be charged an ‘over limit fee’.

 If you have transferred a balance from one credit card to another - this indicates that you have been unable, or you may have been finding it difficult, to pay off an amount owed to a credit card provider; instead you have opted to transfer the balance owed to a different provider who has offered you a lower rate of interest or a set period of time over which you do not pay any interest.

 If you have opened several accounts over a short period of time this shows desperation and implies that to obtain money was a matter of urgency.

If you are able to show reliability by adhering to the above then, depending on your circumstances, you stand a good chance of gaining access to credit. However, if you have access to too much credit this can, and most likely will, hinder your ability.

If you have access to several credit cards this can be a problem. Even if you do not use the accounts, or if you pay the balance off in full every month, a potential lender will;

1) Question why it is that you want or need access to credit, when credit is already available to you, and;

2) If they award you credit, are you likely to use the credit available, along with any other you originally had access to, potentially spending more than what you can afford to pay.

Lenders do not normally issue a credit card to those they believe are likely to be unable to afford it. Absurdly however, if they believe you may not use the card, even if you have access to it, they may choose to decline your application as they may consider it unlikely they would make a profit.

The same can be said if, according to past transactions detailed within your credit report, they believe you may use the card, but then simply transfer the balance owed, yet again making the company no profit. Although the process of transferring debt from one card to another can help you save on interest, to constantly use this method will have a negative impact on your credit rating, and can also reduce how quickly you actually pay the debt off.

If you have a lot of credit available to you then you should look to downsize. Ideally you should cancel most of your credit cards; this lowers the amount of credit available to you.

If you don’t owe anything on a credit card then contact your provider and close the account. If you have an outstanding balance, try to pay it off as quickly as possible and then close the account. You may want to consider using any savings you have to pay off amounts owing as in today’s current economic climate you may find that your savings make you less money than what you would save on interest if you were to pay the debt off.

It is advisable to obtain a copy of your credit report if you plan on making an application for credit. The information within your credit report is what a lender has access to when a credit check is performed. Not only can they see the details of any accounts you currently hold, or held beforehand, but they can also see if prior applications for credit have been made.

Before you make an application for credit, inform the provider that you intend to apply but would first like to know more. Often a provider can perform a quotation search, as an alternative to a credit check.

A quotation search will give you an idea as to how probable it is that your application will be accepted. A quotation search is simply an enquiry, not an application. Therefore it cannot be seen by lenders who search your credit report, and consequently will not create a negative impact on your credit report.

If you do not meet the lenders criteria or you fail the quotation search then do not apply. If you make an application for credit which is turned down it can affect your chances of obtaining credit elsewhere.

To avoid continuous rejection, and the affect this will have on your credit report, if you do choose to apply for a product and your application is declined, immediately obtain a copy of your credit report; do not continue to make applications for credit without doing so.

Check your credit report thoroughly for any inaccuracies. Ensure that your name, date of birth and address is correct for each account that is classed as active; these are the accounts you use at the moment, as well as the accounts you still have access to but no longer use.

If you find any information to be incorrect you should immediately inform the account provider and the credit referencing agency from which you obtained your credit report. Such incorrect information can delay or even prevent an application from going through as the lender will need to ensure that the personal identification of the applicant hasn’t been compromised.