Q & ACategory: LoanWill increasing credit limit out of the total number of credit cards affect future loan application?
Zachary asked 2 years ago

Hi KC, I just watched your video on ‘Credit Card A-Z’. In the sharing, you encouraged your audience to take as many credit card as possible for the perks. Will increasing credit limit (increase the number of credit cards) affect future loan application for mortgage especially when monthly income is lower than the total available credit limit of those credit cards (recorded in the CTOS report)?

1 Answers
KCLau Staff answered 2 years ago

The strategy will have a good credit score. That’s something banks will look at.
Regarding mortgage approval, some banks look at the overall credit card limit too. What I heard is that some banks see that you have a lot of not utilised credit and might see it negatively. However, I am not sure which bank does that. I am also not sure if this is true. Because banks change their underwriting requirement from time to time, and keep it in their “black box” so you can’t game it. 
To my understanding and logic thinking:

  • bank loves to lend money to people who are not desperate for loan. Rational: it is safer to lend to people who are not in need.
  • higher credit limit shows that you already got the trusts of so many other banks. 
  • many credit cards give the history of your payment pattern. If you are a good paymaster, banks should be confident to lend more to you.