Loan Applications and Credit Cards

years ago, every used to put down $5000, or conveniently omit certain credit cards due to credit reporting back then,
Now that we have CCR, things have changed,

a contact of mine has asked me what sort of info can the banks find out, in regards to limits, changes to limits, when filling out these forms? as I understand theyve decreased a limit on a card

eg can the loan bank call up the credit card bank and ask, whats their limit, whats their balance etc etc
or if the loan bank asks for a recent statement, how do you explain, if one month you have a $20k balance, and the next month you have a $20k positive balance, for whatever reason?

Whats the current procedure for credit cards vs loans etc please?

 

General rule now days is that the lender is going to know what cards you've got and what the limits are. If you've recently reduced the credit limits then you just need to provide supporting evidence of this (e.g. latest statement).

The limits are the important part now how much you pay month to month (though this needs to be covered off in living expense assessment). Most assess based on 3.8% of the credit limit as a repayment e.g. $10K limit = $382 per month liability.

Obviously conduct needs to be good too (no late fees / missed payments).

 

yeah with CCR, thats exactly what I thought, I know that once you close a credit card, it can take months to show up on your credit file, I am not aware limit decreases show up or not on your record, as ive never done one

a lot people seem to think even now that its all about the balance owed on the cards, and not the limits, however I know a few people who have been asked what their current balance is when applying for a loan

 

Every credit card currently active is likely to be in the credit report, along with the limit and how up to date the repayments are. If anything I see false positives, where people have closed an old card but it's still on the credit report (we then have to get statements from the provider to prove it's closed).

If your friend has cards they don't want to report, my suggestion is they close those cards. Not reporting information just starts the bank asking more questions.

 

Does reducing the card limits affect credit score in any way ?

 

It shouldn't...

 

I had the same issue recently and had to submit a proof of closure

 

Most lenders treat them the same way as CC (based on limit) for purposes of assessment

 

That's an interesting one, maybe you can't borrow any money whilst you are in possession of it!

 

What if we close the credit card ? Does it impact credit score in a negative way

 

If anything it should be a positive, you've paid back a debt.

 

So is it best to reduce limit(to increase borrowing) and leave card open if planning to apply mortgage in the next six months ?

 

Some will ignore altogether some will ask for 3 months statements and take the highest spend over 3 months as the effective "limit".

 

Looks like having charge cards are better than normal credit cards if borrowing capacity is a concern

 

Y-man and his subtle gloating.....

 

Yep. I had a lender ignore the card limit as a liability by presenting evidence that the card is paid out in full each month.