Credit Limits & Applying for Mortgage

[ercchry]

High limit, low usage is good for your credit score. Proof that you are responsible enough to handle more credit.

We are starting to see some lenders qualify people based on limit vs usage though for mortgages... I won’t be overly concerned about it though

[ExtraSlow]

I would assume the difference to your credit score would be pretty small, and in most cases probably small enough that it wouldn't move you from one "risk bucket" to another, and thus, no true effect on your life.

[16hypen3sp]

So really, there isn't a negative effect for doing it, unless you constantly spend money and carry a balance all the time?

[Disoblige]

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So really, there isn't a negative effect for doing it, unless you constantly spend money and carry a balance all the time?

If they are offering you the credit increase, always take it.
As mentioned, it is good to have high limit and low usage. It is not that good if you are using a higher percentage of your credit to your limit. Usually they offer this increase when they see you had a month that was quite extravagant but also have good long standing history of payment.

[ExtraSlow]

Lots of people have poor self control and will end up using that increased credit if it's available. I'd argue that you should always decline the credit increase.

You should assume you are average in your behavior. And the average person should decline the credit increase.

[gwill]

wouldnt access to significantly more money increase your risk or mess with your ratios the banks use to decide when lending to you?

[ercchry]

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wouldnt access to significantly more money increase your risk or mess with your ratios the banks use to decide when lending to you?

Not usually, no. I’ve only seen it with a few lenders where they will amortize the limit of a HELOC at 25yrs at benchmark for qualifying... but not all do this

[16hypen3sp]

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If they are offering you the credit increase, always take it.
As mentioned, it is good to have high limit and low usage. It is not that good if you are using a higher percentage of your credit to your limit. Usually they offer this increase when they see you had a month that was quite extravagant but also have good long standing history of payment.

Ahh, I see. Makes sense. I paid all my taxes by credit card last spring. I usually utilize my credit at ~7.5% or so. If I take the increase, the utilization rate should drop to 5% or something.

My biggest worry is that it will somehow affect me negatively when I put in an application to lease a car next year.

[Buster]

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to lease a car next year.

Why would you want to go down to two lanes?

[ThePenIsMightier]

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Why would you want to go down to two lanes?

[tonytiger55]

Depends on how much the limit is. I mean if you have a $1000 credit card. Then yes increase it.

It counts as potential debit when you want to borrow when it comes for a mortgage. Hence you will be able to borrow less, unless you decrease your limit. Again that depends on how many credit cards you have and the limits. Again it may not count at all depending on the other variables at play.

Yes you can decrease your credit card limit before you apply for a mortgage. Or your mortgage guy at the bank can help do that for you.
But you are relying on your own financial prudence to do so and also you are relying on the competence of your mortgage guy/gal to know this. Though some things may have changed. I would still take a conservative approach and fiscal responsibility.

If you are applying for a mortgage in a year. Then start now in clearing up your financial profile.
Your mortgage will be based on four factors. Income, Savings, Debit(or potential debit) and Credit score. Your credit score is only one factor of four.

[16hypen3sp]

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Why would you want to go down to two lanes?

Lol, figured that might show up in this thread.

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Depends on how much the limit is. I mean if you have a $1000 credit card. Then yes increase it.

It counts as potential debit when you want to borrow when it comes for a mortgage. Hence you will be able to borrow less, unless you decrease your limit. Again that depends on how many credit cards you have and the limits. Again it may not count at all depending on the other variables at play.

Yes you can decrease your credit card limit before you apply for a mortgage. Or your mortgage guy at the bank can help do that for you.
But you are relying on your own financial prudence to do so and also you are relying on the competence of your mortgage guy/gal to know this. Though some things may have changed. I would still take a conservative approach and fiscal responsibility.

If you are applying for a mortgage in a year. Then start now in clearing up your financial profile.
Your mortgage will be based on four factors. Income, Savings, Debit(or potential debit) and Credit score. Your credit score is only one factor of four.

The limit increase is on my only credit card, RBC Infinite Avion. Current limit is 20k. Eligible for an increase up to 28k.

[ercchry]

There is at least two actual mortgage brokers in here and both of us have already said it’s based off balance and not limits

[16hypen3sp]

Yah. I think I'll just make it an even 25k. Thanks for the discussion here guys.

[tonytiger55]

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There is at least two actual mortgage brokers in here and both of us have already said it’s based off balance and not limits

@ercchry out of curiosity. Has it always been on the balance on the broker side?

When I was at TD(this is back in 2014 &I can't speak for the other banks). Credit stuff was always on the limit side. The underwriters would not budge on that as it was seen as potential debit.
Some applications we could not do, it would go to a outside broker that would close the deal. Sometimes the product they used to close it with would be a TD product. It would be something we would not have access too.

[ercchry]

In the broker channel, yes. Besides what I mentioned above about HELOCs