The first thing to note is that credit card limits matter with most but not all lenders. There are a few lenders that will not factor in credit card limits into calculations where the cards are shown to be paid off in full each month over a 3 month period.
When banks look at how much they will lend you, they consider your income and your commitments. So it goes with out saying that they look at the wages you earn and the debts you have (car loan, HELP debt, living costs etc). They also look at your credit card limits. But why do they do this if you pay off your credit card each month? Well the answer is because the banks are factoring into their calculations the possibility that you might start to use your credit card more and carry debt on the card beyond the end of the month and start to need to make interest repayments on this debtā¦which reduces the amount of money you have available to meet home loan repayments.
Does this mean you should cancel your credit cards before applying for a loan? Not necessarily. Whether you need to do this will depend on the overall strength of your position and your mortgage broker can advise you about this as part of arranging finance for you.
We find many clients are very worried about the impact of their credit card limits on their chances of getting a home loan approved when in fact in the majority of cases this is of little or no concern.
