I have just received a letter from my bank, the co-op, saying they are lowering the credit limit on my credit card from £5900 to £4150 on the grounds that I am not using the full limit regularly. It goes on to state that having an unused credit limit on a card can “negatively affect your credit score” and it will restore it if I wish. Is it correct to claim that having unused credit on a card can affect your credit score? RO, St Ives, Cambridgeshire
This seemed to us more like a bank trying to reduce its potential credit liabilities, than an attempt to help its customers. Banks have to cover all potential borrowings from their customers – at a cost – which is why many customers received letters like this after the credit crunch.
We asked credit reference agency Experian if there was much validity to the co-op’s claims and were directed to a blog post by its consumer affairs manager, James Jones. In it, he suggests that, far from having a negative effect, it’s much more likely to actually help your credit score. “Most lenders doing a credit check will be encouraged to see that another lender trusted you with a high credit limit.”
The co-op, which announced itself “like back” in recent weeks after its high-profile issues, told us the letter was aimed at highlighting this issue to certain customers who “consistently use a small proportion of their available credit with us” .
“We have already updated the letter as we accept that it may not have been clear, and we apologize for any confusion caused,” it says.
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