Credit Limits & Applying for Mortgage

[ajooo]

Basically, i have an offer from my bank to increase my credit card limit and am curious if i should take the increase when i have to apply for a mortgage around this time next year.

thanks guys.

[tch7]

Won't make much difference one year from now either way.

If you need that bigger limit, take it. If not, then don't bother.

[leftwing]

If you raise it now, you can call and lower it at any point...ie before you apply for a mortgage next year.

Like tch7 said, it wont make much of a difference. Especially if you have a history of not carrying a balance. If you do carry a balance have you looked at a line of credit?

My bank offered me a line of credit and it works great. Whenever I have a balance on my credit card I pay it off with my line of credit that way im not paying 19.99% on my balance. My line of credit is only prime + 5% or something.

[pheoxs]

Originally posted by leftwing
If you raise it now, you can call and lower it at any point...ie before you apply for a mortgage next year.

Like tch7 said, it wont make much of a difference. Especially if you have a history of not carrying a balance. If you do carry a balance have you looked at a line of credit?

My bank offered me a line of credit and it works great. Whenever I have a balance on my credit card I pay it off with my line of credit that way im not paying 19.99% on my balance. My line of credit is only prime + 5% or something.

Jesus ... mines currently @ 3.5% with TD (Unsecured, got it when I was going to school but have never used it) I couldn't imagine using a 8% LoC

[Disoblige]

ajooo, I would always recommend to take the credit limit increase. When you are going to apply for a mortgage, having a larger credit limit has nothing to do with your ability to get the mortgage. It is how much credit you are using that matters.

In fact, it will help you more if you increase your limit because even if you pay your credit card balance in full, lenders will see you as a larger risk if you use a bigger % of your credit limit.

When a bank asks me if I want to increase my limit, I always say YES. As a general rule of thumb, you wouldn't want to use more than 35% of your available credit. I managed to lower my usage to around 10% now, which is great!

Unfortunately to the replies above, I don't agree with the advice at all.

If you have any more questions, I advise talking to a Mortgage Broker who will most probably tell you the same thing.


I would recommend reading up on what affects your credit score and how you can improve your score. See below.

http://www.fcac-acfc.gc.ca/Eng/resou...mprend-13.aspx

[leftwing]

Originally posted by pheoxs


Jesus ... mines currently @ 3.5% with TD (Unsecured, got it when I was going to school but have never used it) I couldn't imagine using a 8% LoC

Hmm,

I didn't really shop around, they offered it and I took. Like I said they sold me on the interest difference between CC and LOC. To be honest, I don't use my credit card or my LOC much and if I do its paid off pretty quick. I am pretty young so I am not putting any significant purchases on either. Maybe ill look into better rates haha.

[J.M.]

Originally posted by pheoxs


Jesus ... mines currently @ 3.5% with TD (Unsecured, got it when I was going to school but have never used it) I couldn't imagine using a 8% LoC

I guess the LoC TD keeps offering me at 8.5% (prime + 5.5%) is a pretty shitty rate haha.. The first year is 2.99% low fixed rate or something though.

[relyt92]

Originally posted by J.M.


I guess the LoC TD keeps offering me at 8.5% (prime + 5.5%) is a pretty shitty rate haha.. The first year is 2.99% low fixed rate or something though.

My LoC with TD is unsecured and is prime + 3%, and they offered it to me out of the blue without me even looking for it.

[dubhead]

Originally posted by J.M.


I guess the LoC TD keeps offering me at 8.5% (prime + 5.5%) is a pretty shitty rate haha.. The first year is 2.99% low fixed rate or something though.

My TD Visa is only about 3 or 4 points more than that.

[ajooo]

thanks everyone for the replies/advice

looks like i'll go ahead and increase the limit.

[Toma]

Lot's of incomplete advice....

DO NOT take the credit increase unless you need it.

They CAN nail you with having too much available credit, whether or not you are using it.

I've always had awesome credit, but had trouble getting loans/mortgages because of too much available credit. Argument is, if you max out all your available credit, you will be over the amount they calculate that you can service.

For one mortgage, I actually had to get rid of one of my credit cards to make them happy (even though the balance was always zero.)

I dunno what kind of credit you have available, but if it's high, IT CAN work against you.

To build your credit score by next year, buy everything you buy on your credit cards, and pay off the full amount of the statement.

[Disoblige]

Toma read the link I posted before you knock on my advice. I think I was the only one in here offering some decent advice while everyone else was either not or off-topic.

Just because you pay off your credit card every month doesn't necessarily mean you're building on your score. It's the amount of available credit you use that matters too.

And something I didn't know previously also, is your student loans don't help increase your credit score. It can only decrease it if you don't pay on time.

Although, we don't know if OP has other sources of credit, so that part might have an effect on what he should do too, which is why I recommended he read that link.

For example: Your score may be lower if you only have one type of credit product, such as a credit card.

It is better to have a mix of different types of credit, such as a credit card, auto loan, line of credit or other loan. It can even help if you have a second but different type of credit card, such as an account with a store.

[max_boost]

Two things man.

1. It takes time to build up a score.
2. Once you are over a certain score, (might vary between the banks), but for TD it is 650, then it doesn't matter anymore you are good for the best rates etc.

So after that it's just bragging rights, I'm at 750, or 850 etc. lol

[tch7]

Originally posted by Disoblige
Toma read the link I posted before you knock on my advice. I think I was the only one in here offering some decent advice while everyone else was either not or off-topic.

Lender's are concerned about more than just the credit score. Your points are valid, but fail to take into account what Toma points out. Having a lot of credit available is a risk, even if that person has been responsible to date. Circumstances can change quickly.

It is generally better to take the credit increase if you are financially responsible, but I stand by my original statement that the net impact 1 year from now is relatively inconsequential.

[Disoblige]

Yeah, I do agree with Toma when he says depending on the credit you have available, if it's high, IT CAN work against you.

In terms of whether someone needs credit or not, I think that depends on what they deem as "need". A lot of people think as long as they pay off their monthly balance, all is good. But if you're spending more than 35% of your available credit, that's bad. That's what I really wanted to point out here.

In my case, I'm financially responsible and have no credit card debt, so I typically do take the credit limit increase when the bank offers it so I lower my percentage of credit used. Might be different in OP's case since we don't have his entire situation.

[syb65]

La la la.... and the walls come down.

[Sugarphreak]

...

[pheoxs]

Originally posted by Sugarphreak
I've always heard that they consider the entire credit line as unsecured debt regardless of what you actually owe on it. That said qualifying for a mortgage is a joke so I wouldn't worry about it either way.

I believe banks do, not sure how mortgage brokers get their numbers.

Say I have a 5k$ CC which equates to a minimum monthly payment of 150$ (making numbers up)

They would treat that as if I had a 150$ loan when they run their numbers regardless if I have a balance or not.

[TimLacroix]

Depending on the purpose of a mortgage (Purchase, Refinance, Renewal... etc)... lenders will consider over all credit to determine risk.

However, the general rule is that a qualifying payment is used for unsecured credit cards and lines of credit to the balance only... not the limit. This is 3% of the balance owing.

The exception to the rule is if you are refinancing to pay off said CC or LOC... then there is a possibility of a qualifying payment and / or a request to close the account depending on what other credit is available.

[16hypen3sp]

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In my case, I'm financially responsible and have no credit card debt, so I typically do take the credit limit increase when the bank offers it so I lower my percentage of credit used.

Bumping because I just got another email from RBC for a credit limit increase on my credit card. Wondering if I should take it. I did a quick google search and found a page that says if your spending remains the same, an increase reduces your credit utilization which is a good thing because it's a factor for credit reporting agencies.

Lots of people seem to think that it hurts your credit score to take an increase...... I'm not so sure.

Here, read this: https://www.creditcardscanada.ca/edu...imit-increase/