Loan applicants continue to be haunted by poor credit card decisions, even though national credit card debt is slowing, Melbourne broker Marios Rokka says.
Rokka says he’s seen many home loan applications adversely affected by clients who accepted seemingly innocent credit card limit increases.
“Automatic credit card increases are common these days, but [they] can have a big impact on your borrowing power, especially when you don’t use the limit you have been granted,” he says.
Rokka’s observations follow reports that the value of national credit card debt has fallen from more than $50bn last year to $48.7bn.
The availability of debit cards, where users spend their savings rather than relying on credit, and technology changes have been lauded as reasons for the shrinking credit card debt.
Rokkas points out that a $10,000 credit card limit, for instance, can reduce a person’s borrowing limit by up to $30,000.
“When you’re going through a home loan application, lenders are going to look closely at your savings and income, but they also place a huge emphasis on the amount of credit you have available, which could potentially affect your ability to make future repayments.”
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