Most people know that reducing their debts can increase their borrowing limit. But did you know that lowering your credit card limit can increase your borrowing capacity?
In working out how much you can borrow, lenders determine the likelihood that you might default on the repayments. In performing this risk assessment, they look at a number of factors including your credit history and job security. But something else they consider is your credit card limit.
In the eyes of a lender, the higher your credit card limit, the more chance you have to get into financial difficulty. So, if you want a simple way to increase your borrowing limit, get rid of any surplus cards, and reduce your credit card limit to the absolute minimum you need. Want to find out your mortgage borrowing capacity? Talk to an MFAA member today.