There are currently around 16 million active credit cards in Australia right now – that’s almost one card per person. The Australian Bureau of Statistics also reports that around two-thirds of Australian households either own their home or are in the process of buying.
However, did you know that by simply owning a credit card (even if there is nothing owing on it) you could be reducing your chances of having a home loan application approved?
As anyone who has ever applied for any finance product will tell you, banks and financial institutions will always ask how many credit cards you hold and how much the combined limit of them is. However, they rarely ask how much is owing on them.
The reason for that is because the lender only cares about your ability to service the loan, should they approve the application. That means, they don’t care if you’ve paid the card off. They only care if you could service both the loan, and your credit card payments, in the event you maxed out your limits.
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For this reason, the Home Loan Experts recommend that the best thing you can do to maximise your chances of getting a home loan approved is reducing your credit card limit to the smallest possible minimum to suit your needs, at six months prior to applying for the loan.
This way you reduce your financial liability.
* This financial advice is general in nature and does not take into consideration your personal circumstances.
You might also like:
The BHG guide to home ownership
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