Will Closing My Credit Cards Increase My Borrowing Capacity?
Yes, closing your credit cards will increase your borrowing capacity. Banks, lending specialists, and mortgage brokers use home loan applicants’ credit limits to determine borrowing capacity. Borrowing capacity for individual applicants varies depending on loan types, lenders, income, debt, and family size. Simply owning a credit card can decrease borrowing capacity regardless of credit history.
There are countless ways to increase your borrowing capacity, and closing credit cards is just one method. Eliminating or reducing personal and high-interest-rate debts can significantly increase your borrowing capacity, especially if you pay your credit card debt in full during an interest-free period. This can also boost your credit score, which is never a bad thing.
For the best chances of an increased borrowing capacity, it is recommended to be aware of your credit score. Lenders perform credit checks, and a good credit score has the potential to up your loan amount. Researching the lenders and home loan types available to you and then comparing them can allow you to choose an option that works best with your financial situation. Saving for a bigger deposit, increasing income, and lowering credit card limits are additional steps you can take to improve your borrowing limit.
At Mortgage House, our lending specialists are equipped with the knowledge and experience to successfully guide potential buyers through all aspects of home buying while also recommending the best ways you can up your borrowing limit. Reach out to us today for more information.