Change between credit cards and how to maintain a good credit rating?

I was wondering if there were any guides around the best practices to change between cards and maintain the best credit rating you can.

For example, i have two cards that both have a 15k limit. I am probably sitting around the limit of credit would be with my salary. I want to get rid of one and go to a different bank. Is it best to cancel one card and then apply to another? Or is it best to pay down the balances on all existing cards and then apply for the new card and cancel the other card once approved?

I would prefer to go the route that will affect my credit the least without the chance of a card being declined.

This site cannot give individual financial advice including if you should cancel cards .

credit card balances of other cards form part of any credit card application so obviously a high current balance makes you a more risky client

Have a read at this if you haven’t already.

It’s a very deep subject so make yourself a cup of tea and set aside 30 min to slowly digest the info.

Good luck.

Hi Nick,

As Mark has already said, this site cannot give financial advice however it can offer guidance in the fundamentals of acquiring points and how to use them.

The golden rule I believe I this:

If you can’t pay your entire account balance before the due date, you have defeated any benefit  of accumulating points!!

You MUST pay down the balance of ALL credit cards every month to avoid interest payments or you are going backwards.

Hi Guys, I want to to thank you all for your comments. To be honest I always pay my cards back to $0 each month. I did go through and read the 4 part guide that was posted so thank you very much for that. It doesn’t seem to mention at all how closing a credit card impacts your credit rating. Most of the guides I have read are from the states and say that closing a credit card can be detrimental to your rating.

I was more so looking for a general guide to best practice when its time to switch over to a new card.

ie should you pay a card back to $0 then cancel it ( I heard this affects credit because you credit amount has essentially decreased) however it has the added benefit of not having a potential credit amount available to you to max out as a liability.

Or is it considered better to have a $0 on a card and apply for a new card then cancel the original? I am not concerned with transferring existing balances. According to the article, the balance of accounts is not available with the new CCR system so paying down a card to $0 shouldn’t technically have any benefit when applying or a new card.

Hi Nick - Your question is how to avoid impacting your credit rating, and how to minimise the chance of being declined. Nobody can say if you will be declined at the next card provider - their decision algorithm is a secret - however, I believe there are some standard facts they will include in any decision.

Your current overall assets vs liabilities, your income vs expenses. Having one less $15k card (which they will assume is ‘at the limit’) will reduce your liabilities and monthly expenses. So if it’s not a hassle, I would personally close any credit no longer required before applying for new finance.

Another fact they may consider is how many credit applications you have made - so personally I try not to chop and change too much.

I think it’s mainly a myth that you obtain a ‘good’ rating in Australia - at your current provider they will of course keep internal records of how you use and repay credit - but the next provider knows nothing of this, and can only decide based on your application details and facts in your credit file (why not order a copy if you are interested).

Hope this helps & of course nothing written here is financial advice.