How banks factor your credit card limit into your application?
It is important to remember that your ability to borrow for a property will be significantly impacted by having high credit cards limits, not just credit card debts.
When assessing your loan application and your borrowing capacity, lenders will take into account your income and current debt levels, and your current credit limit. As a result, you should consider keeping your credit card limits as low as possible, as lenders view credit card limits as potential debt in the future.
Lenders will assume, regardless of your balance on the account, that you’ll be paying 3% of your credit card limit as monthly repayments. Which could negatively impact your ability to borrow if your serviceability is struggling to reach a surplus. As an example, a $20,000 credit card limit results in a $300 monthly liability.
If you do decide to lower your credit limit, your bank will send you a written confirmation of the reduction, which you should keep in case you need to present it to your lender when you’re applying for your loan.
If you’d like to know more, get in touch with us.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal financial situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
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