Most credit cardholders think that owning a credit cardwill not have any impact on their borrowing capacity as they pay their bills on time. However, this is not true. Did you know that a high credit limit on your card can lower your chances of getting a home loan? Yes, that's true. You may be using your credit card for all the right reasons and could also be a prompt payer but having a credit card can affect your home loan application if you choose to apply for one in the future.
When you apply for a home loan, lenders will first evaluate your profile and check your credit score before approving it. While evaluating your profile, lenders take into account your active line of credit which includes all types of loans and credit cards. Even though you are a prompt payer, if you have a huge credit card debt, lenders will think twice before approving your home loan application.
There are several factors lenders take into account before approving your home loan application such as your repayment capacity, age, credit score, credit history, and your salary. Based on the findings, lenders decide the interest rate and other terms and conditions of the home loan if it is approved. When you have huge credit card bills, it affects your credit score negatively. Generally, home loans are not approved for applicants with low credit score. A high credit card bill affects your home loan in the following ways:
If you want a good deal on your home loan, check your credit score and make some healthy financial changes before applying for a home loan.
Though credit cards can affect your home loan eligibility, there are other factors that you should consider as well such as existing consumer durable loans, phone bills, the average balance in your savings account, and your regular net income. Make sure you take all necessary steps to make yourself look like a good applicant before you submit your home loan application.