How Does My Credit Card Limit Affect My Borrowing Capacity Even If I Don’t Use It?

High credit card limits can negatively affect your borrowing capacity even if you do not use it. This is because lenders will look at high credit card limits as future debt and take into account the minimum monthly payments of the future debt. If you are not planning on taking advantage of high credit card limits and increasing your personal debt, lenders will still take the limit into account. Think of it like this: the higher the limit, the lower your borrowing capacity because lenders will view high limits as a future liability.

There are ways to increase your potential borrowing capacity, starting with lowering any high credit card limits that are not in use. You should monitor your credit score and be aware of any loan applications that have the ability to damage your credit score. Lenders perform credit checks on all home loan pre-approval applications, and a low score can negatively impact your borrowing capacity. In addition, closing or paying off any open credit cards will boost the amount approved for your desired home loan.

Do you have questions or concerns about your potential borrowing capacity? Mortgage House lending specialists can help you understand your current borrowing capacity and provide specialized recommendations that can help to increase your loan amount. Take a look at our Mortgage Borrowing Calculator for an estimate on your current borrowing capacity potential.