Credit CardsGetting your mortgage application together requires financial scrutiny from both yourself and banks. This scrutiny answers questions like how much you can borrow as well as looking deeper into whether your finances confirm that you do repay your debts.

Your credit card debt is part of this scrutiny and consideration when applying for a mortgage. What many people don’t realise is that high credit card limits can also impact your home loan application.

If you have a high credit limit, you also have a high debt risk. The logic being that there is very little stopping you from boosting your credit card limit the day after your loan is approved.

“We have to take account of 3% of the total credit card limit, regardless of what the applicant owes,” says Homeloans Ltd.
“If they had a $10,000 limit but they only owe $1000, we still have to assess $300 a month and that comes directly out of their liability. It does make quite a difference.”

Even if you haven’t used your credit card for the past five years and it sits in a draw, a high credit limit will negatively affect your serviceability. The best thing you can do is lower your credit limit, or cancel that credit account entirely.

If you have to pay off their credit account before cancelling, it is of the utmost importance that you pay your credit card bill on time, according to your minimum repayments.

If you are looking to get a loan speak to Pinpoint Finance and discover if your credit cards are holding you back from a successful home loan approval.

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