The cry of almost every client we have!
Looking to purchase a home? ????
Still have a credit card? ????
Don’t be fooled… That credit card DIRECTLY impacts how much a bank will lend you.
It’s essential to understand how your credit card usage can affect your borrowing power with banks.
Here’s why:
1. Credit Limits Matter: When assessing your borrowing capacity, Australian banks consider your existing debt obligations, including credit card limits. Even if you pay off your credit card balance in full each month, banks still factor in the maximum amount you could potentially borrow. Higher credit limits can reduce the amount a bank is willing to lend you for a mortgage or other loans.
2. Impact on Serviceability: Banks use a serviceability calculation to determine whether you can afford the repayments on a loan. Your credit card repayments, along with other debt obligations, are taken into account when assessing your ability to service a loan. High credit card balances or multiple credit cards with significant limits can reduce the amount you’re eligible to borrow.
3. Credit History and Score: Timely repayment of your credit card bills is crucial for maintaining a healthy credit history and score. A good credit score demonstrates your creditworthiness to banks and can improve your chances of securing a loan with favourable terms. On the other hand, missed or late payments can lower your credit score, potentially reducing your borrowing power and increasing the cost of borrowing.
You may enjoy a free flight every year… but dont forget that those points may be costing when it comes to purchasing your dream home!
