Why paying off your credit cards is not enough

Published by MFAA

Getting your mortgage application together can require quite a bit of financial scrutiny. In order to figure out your serviceability, your potential lender will look deeply into your finances.

It’s a no brainer to take your credit card debts into consideration when applying for a mortgage. But what many people do not realise is that high credit card limits will not bode well for a home loan application.

If you have a high credit limit, you also have a high debt risk in the eyes of your lender.

Even if you haven’t put a cent on your credit card for the past five years, a high credit limit will negatively affect your serviceability. The best thing you can do is lower your credit limit, or cancel that credit account entirely.

If you can, pay out your credit cards and avoid having any other debt so you can use your full income in serviceability assessments.

For those that have to pay off their credit account before dreaming of cancelling their liability, it is imperative that you pay your debt on time, according to your minimum repayments.