How much difference does credit card limit make to lending applications

Hi all,

Currently I have a credit card limit of $21k combined total (2 combo cards given by the bank - mastercard and amex for better reward points). The mastercard has a minimum limit on it of $15k (not allowing me to reduce it any further) and amex on $6k limit.

I travel internationally regularly for work conferences which are tax deductible and put these on the credit cards for a good amount of reward points from the amex. Which i then claim back for fuel vouchers. Probably get about $1000 worth of vouchers a year as the amex card is generous with points. I also ensure the credit card is paid off completely each month so there is no ongoing debt.

However, I am wondering if the $21k credit card limit would be a significant barrier to borrowing more for new IPs in the near future? Like how much extra roughly would I be able to borrow if i was to get rid of it or change to a different card for significantly lower credit limit?

Thanks in advance

 

Speak to your banker or broker can tell you pretty quickly.
But approx 3-4% of the credit card limit would be used as a commitment so ~$800p/m
So it's a pretty big impact, doesn't mean needs to be closed or reduced now, but before purchase/formal approval.

I have few different credit cards ~$60k total in limits.
- personal exp
- taxable exp
- travel
- interest free

Come time for loan approval - these likely go.

 

A credit card cuts your borrowing capacity by roughly 5-6 times the limit. These cards are reducing your borrowing capacity by about $120k.

* Edit * I did initially think it was $100k, but quickly ran it against a few lenders calculators and it's increased to $120k. People keep saying things are getting easier and more generous in the lending market. I beg to differ.

 

I've heard banks factor in 3% of max credit card as a monthly expense.
$21k combined cards, would be $630 per month or $7,560 a year
Which is a reduction of around $57k of lending.

 

Used to be 3% - has gone up to 3.8% and higher depending on lender,
Pete's answer above is on the money, reduces overall borrowing capacity by about $120K+

 

That metric changed earlier this year, it got brought up in one of the many reviews of the finance sector. I think it's about 3.8% now.

 

3.82%

 

We have just experienced exactly this.
We are not big Credit Card users anymore.
Part of our Bank application for our about to commence build involved the usual DSR stuff.
We had 3 Credit Cards (acquired over a number of years for various Bank dealings), with a combined limit of $64k.
Two were hardly ever used, and one was the day-to-day main one for online direct debits and so so on.
We closed 2 Cards, and dropped the limit of the remaining one to $6k.
We went from having our original application being heavily scrutinised, bordering on not going to be approved due to the Credit Cards, to being able to borrow $20k more than the original requested amount.

 

Wow ok, thanks for all the responses and heads up everyone about the significance of credit limits on future loan applications. Sounds like I know what I need to do now haha. I am considering moving forwards with my property investing journey in the near future and it sounds to me that a big credit limit will pose a barrier.

 

Do non-banks assess credit card limits the same way? would borrowing capacity be reduced by 5-6 times?

 

Yes