The Hidden Impact of a High Credit Limit on Your Borrowing Power
When you’re preparing to apply for a home loan, it’s normal to focus on the obvious factors: your income, savings, and property price range. But there’s one element that often flies under the radar — your credit card limit.
Even if you pay off your balance in full each month, a high credit limit can still impact how much you’re able to borrow.
Why Your Credit Limit Matters
When lenders assess your home loan application, they look beyond your actual debt. They also consider your potential debt — what you could owe if you maxed out your available credit.
That means if you have a $10,000 credit card limit, lenders will typically factor that full amount into your monthly financial commitments, even if your current balance is $0.
To them, it’s about risk. If you suddenly used that credit limit, they want to know you could still afford your mortgage repayments.
A Quick Example
Let’s say a borrower has:
A $10,000 credit card limit, and
Is applying for a home loan.
Even though their card balance is paid off each month, that $10,000 limit could reduce their borrowing capacity by around $40,000–$50,000, depending on the lender’s assessment.
That’s a significant drop in borrowing power — just from having a credit card with a high limit.
What You Can Do
If you’re planning to buy a home soon, it’s worth:
Reviewing your credit cards and limits. Consider lowering the limit if you don’t need the full amount.
Paying off and closing unused cards. Every open credit facility counts.
Chatting with your mortgage broker early. We can help you understand how your credit limits affect your borrowing capacity — and recommend the best approach for your situation.
The Bottom Line
Your credit limit doesn’t just show how much you can spend — it also tells lenders how much you could owe. A high limit might sound convenient, but when it comes to your home loan application, less is often more.
If you’re unsure how your credit cards could be affecting your borrowing power, reach out to our team. We’ll crunch the numbers and help you put your best foot forward before you apply.
