Credit cards are convenient but they can damage your home loan application. We crunch some numbers that might just surprise you.
Did you know that just having a credit card – even if you do not have a balance – can dash your chances of getting the home of your dreams?
That is because lenders will typically calculate your borrowing power based on the assumption that your credit card limit is fully used.
To help you understand how big an impact a credit card can have on borrowing power, we crunched some numbers for you.
For a couple with a joint income of $130,000, we put in an application through ten different lenders on our panel and then increased the credit card limit in $5,000 increments. The impacts on borrowing power were:
So what options do you have?
Always think twice before using the plastic. Anyone applying for a home loan can help themselves by either getting rid of certain credit cards or reducing the available limit.
If you want to know more about how your credit card affects your chances of getting a home loan, speak to a Mike Pero adviser today. They can help you put your best foot forward when applying for a home loan, find a solution to help pay off loans sooner and show you different debt consolidation options too.
