I have just been sent a letter by my bank, the Co-operative, to say it is lowering the credit limit on my credit card from £5,900 to £4,150 on the basis that I don’t use 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 that 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 sounded to us more of a case of a bank that is trying to lower its potential credit liabilities, than one trying to help out its customers. The banks have to cover all their customers’ potential borrowing – at a cost – which is why lots of customers received letters like this after the credit crisis hit.
We asked the credit reference agency Experian whether there was much validity in the Co-op’s claims and were pointed to a blog by its head of consumer affairs, James Jones. In it he suggests that, far from having a negative effect, it is much more likely that this actually helps your credit score. “Most lenders carrying out a credit check will be encouraged to see another lender has trusted you with a high credit limit.”
The Co-operative, which has been advertising itself “as back” in recent weeks after its well-publicised problems, told us the letter was intended to highlight this issue to some customers who “consistently use a low proportion of their available credit with us”.
“We have already updated the letter as we accept this may not have been clear, and we apologise for any confusion caused,” it says.
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