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I have a credit card upon which I buy my day-to-day purchases, and pay off in full every month, in order to build a credit history.

I have a credit limit of £4050.

My bank (the issuer) emailed me today, saying that because the most I'd ever managed to use on it is £687.31, and as such they're gonna drop the limit to £3100, unless I get in contact.

To me, the human, I honestly don't care. If I ever manage to put over £1000 on it in one month, I'm an abject failure on the way to debt which I will have to pay interest on like a fool.

To me, the member of an economy, I have no idea if this is bad for me or not. Because the only reason I have a credit card is to build up a credit history to eventually leverage to get a mortgage, all I really need to know is: Will having a lower credit limit, which I will still never reach, negatively impact my ability to get a mortgage in future?

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  • Commonly when they drop your credit limit, they drop it to barely over what you use. It's possible they mean to drop it by 3100 giving you a credit limit of 950. That'll take a big hit! Don't chance it, give them a call.
    – Harper - Reinstate Monica
    Nov 2 '17 at 7:29
  • I'm pretty certain to £3,100 is correct; I got a similar letter from the same banking group and it was definitely the new limit they specified, not a reduction. In both cases, the new limit was approximately 75% of the old one.
    – TripeHound
    Nov 2 '17 at 9:20
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    While I appreciate your concern, respectfully, I am able to read my emails correctly. "So, on the 6/12/2017 we are planning to reduce your credit limit to £3100.00."
    – Adam Barnes
    Nov 2 '17 at 11:15
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No, it will have no negative impact on getting a mortgage. You are building up a history with regular payments and are not carrying a balance on the card each month.

Your ability to get a mortgage will ultimately be based on other things.

Money Saving Expert has a good guide on what will affect your credit score.

A further discussion on the topic that backs up that what a mortgage company is interested in is affordability and a stable history.

They really don't care about utilisation ratios. (Though might be spooked by almost maxed out cards - sign of poor spending control, or large unused limits - too easy to go into bad debt.)

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Will having a lower credit limit, which I will still never reach, negatively impact my ability to get a mortgage in future?

This would increase your utilization, the percentage of your total available credit that you use at any one time. Because it decreases the divisor, your total available credit, while not changing the dividend, the amount of your credit that you use. In the United States, you generally want utilization to be between 8% and 30%. So if this increases your utilization, it could hurt your credit score (or if your utilization is low enough, possibly help it).

I do not know if the rule is the same in the United Kingdom or not, but this site claims that it is at least similar. 

687.31 / 3100 = 22.171...%

22% is an OK utilization, assuming you have no other debt. But a utilization of 17% is closer to 8% and may be better. It may be worth calling them to keep your credit limit where it is if they don't ask too much from you.

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  • £687.31 is the highest it's ever gotten. It's usually around a third of that, which lands me right in the 8% range, so that's good. One thing that puts me on edge about that website you linked is that it seems like it's in its interest to sell credit cards.
    – Adam Barnes
    Oct 31 '17 at 23:37

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