I’ve currently been taking advantage of some of the interest free periods offered on new credit cards to juggle some personal debt while I pay off more on my home loan, the aim being to then redraw the money at a later date and just pay off the cards.
My question to you is what effect does this have on me if I’m applying for a loan with a bank. Each time I apply for credit (a credit card) this is registered on my credit report, yes?
So if I apply for a home loan in say 12 months time are these cards going to work against me gaining approval? Is there any way for a bank to see the total limits of my cards withouth me telling them? ie. If I answered the question “what is the total limit of all credit card here” as $2,000 instead of $10,000 or said I had none whatsover are you likely to be brought undone? I’m interested to know,
Cheers.Hi,
Yes you are likely to be undone by this, as they will do a credit check. Never mind that your committing fraud by lying.
I understand things can be tricky sometimes, but basically lenders view credit cards and personal loans as unsecured debt. This is dangerous debt to a lender, and the more you have, the less you will get from them.
Say you had 10,000 in credit cards, but you owed nothing against them, the lender still views this as a 10,000 debt. Because what is to say you go out after getting loan approval and blow the whole lot shopping? Then you will have the debt! They need to protect themselves against that. So keep that in mind when you apply for more. If you have a credit card with nothing owing, either reduce the limit, or close it off completely.
You should also talk to your lender about refinancing if you have personal debt. This might slow you down in terms of investment, but your going to be much better off in the long run in terms of saving on interest, and paying those debts off faster. Get rid of it all onto your home loan and never get it again! At least your home loan is good debt, in that you have borrowed for an asset that will appreciate.
Keep in mind though, dont refinance all the time to put all personal stuff on your home loan as this defeats the purpose of good debt.
Good luck, and have a chat to your lender, if they wont help you, find a new one!This will generally hurt you when you go for a loan. Lenders usually take 2-3% of the limit as a monthly repayment – whether you pay off the card in full or not every month. So if you have a few, it can really add up.
There are a few lenders that don’t have to take into account the cards if you pay in full every month, eg, ING.
Lenders will see the hits on your credit report. Sometimes these don’t show the limit tho. With the loan application, they will generally take your word for the limit, tho I beleive you are giving them the power to contact other banks directly when you sign the privacy statement. This rarely happens.
But if you are going for a low doc loan, many lenders will want to see the last statement of each credit card – to make sure you are not overdrawn and to verify the limits.
Terryw
Discover Home Loans
Parramatta
[email protected]
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Cheers guys. You confirmed what I had suspected. Thanks for the info, this leads me to a second question. If I cancel a credit card is this reported on my credit report, in the same way a loan is reported as being cleared after the last payment? ie. By cancelling the cards will the banks clearly be able to see this or will they only see the original application for credit?
Thanks again. The info you guys give out on here is invaluable.No, loans and credit cards are not recorded as being paid on the credit file. Only applications and defaults etc are recorded.
But if you have cancelled a credit card or paid a loan off, sometimes the lenders may not beleive you, so you should keep records as proof.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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