How your credit cards can impact your Colac home loan application
Would you have ever considered that how you use your credit card could impact your appeal as a home loan customer for your one-day Colac home?
Your credit card activity is one of the first things a lender will look at when considering whether you are a desirable prospect for a new mortgage.
Why?
Read on – we will explain why – and how we can help (if that’s necessary, of course).
Firstly though, did you realise…
Australia is home to around 13 million credit cards – each with an average balance of about $2900 per card.
More than two thirds of the Australian population have a credit card in their name.
So, why would banks review your credit cards?
A loan application means a lender will, inevitably, review:
- what you earn
- what you spend
- what you owe
From here, the lender will calculate your debt-to-income ratio to establish whether you have the capacity to manage your loan repayments.
Where does the credit card come into this?
Interesting to note is that the lender won’t necessarily look at your current credit card balance (what you owe) to calculate your capacity to pay a loan off.
That’s because lenders fact in the possible debt you might accrue while you have a loan. So how much you’ll be able to accrue on the card. That’s because they want to be able to reassure themselves that you are a low risk customer, and that you’ll have the capacity to pay off both your card and your loan as time goes on.
Generally, a lender will assume that you will pay around 3% of your credit card limit.
What does this mean? Well, do a stock take on the credit cards you have, and the limit on each of them before you dive into the home loan application pool – this information could come into play when you apply for a loan.
We can help you work this out, by the way. Just let us know you’d like some help.
Ways to ‘take charge’ of your credit cards
If you want to get your credit cards in order to ensure you’re making yourself an appealing-as-possible home loan prospect, keep the following tips in mind:
- Applying for a number of credit cards in a short amount of time usually raises suspicion with lenders – avoid this if you can.
- If you do have multiple credit cards, go through them, identify the ones that you use the most, and then cancel the others.
- Lower the credit limit on these cards as much as possible – that will make you a more appealing candidate, too.
Pay your credit card bill on-time. No late payments! Perhaps setting up a direct or automatic payment is the best way to go. That way, the lender will be able to see that you are a reliable, responsible borrower. Bonus – it will also help you with your credit score.
At Sinclair Wilson Finance, we are well-across what you need to do to make yourself as eligible as possible for a home loan. Get in touch with us today to discuss your options.