Julian Finch: Why credit cards are killing your risk profile when it comes to home loans
Announcement posted by Invigorate PR 06 Feb 2025
Julian Finch, Founder and CEO of Finch Financial, is warning Australians about the hidden impact credit cards have on their borrowing capacity and credit rating.
"Many people don't realise just how much their credit card limits affect their ability to secure a home loan," Finch said.
"Even if you never use your credit card, banks still count it as a potential debt when assessing your loan application."
Finch is a leading money expert, mortgage broker and founder of Finch Financial, Julian Finch. With decades of experience in mortgage brokerage, Finch offers expert insights and advice to thousands of Aussies seeking to get their loan applications approved. His firm, Finch Financial, achieves some of the highest loan approval rates in the country and is known to secure loan approvals within a matter of minutes.
The hidden impact of credit cards on borrowing power
Finch explains that banks use a multiplier effect when evaluating credit card limits.
"For every credit card with a $10,000 limit, the bank will multiply this by five, assuming a $50,000 liability and deduct this amount from your borrowing capacity," he said.
For example, if a person has two credit cards, one with a $5,000 limit and another with a $10,000 limit, banks will assess the total $15,000 credit limit, multiply it by five and reduce their borrowing capacity by $75,000, even if the cards are paid off in full each month.
"This is a significant amount of money that many homebuyers don't take into account," Finch warned.
How to maximise your borrowing potential
Finch advised that prospective homebuyers should take proactive steps to minimise the impact of credit cards on their loan applications:
- Eliminate unnecessary credit cards - If you don't need multiple credit cards, close the accounts.
- Consolidate your cards into one card - Review the number of credit cards you have and reduce the number down to one if you can.
- Reduce your credit card limits - Lower your limit a few months before applying for a home loan.
- Maintain responsible credit habits - Keeping balances low and making timely repayments can improve your credit profile.
"Credit cards may be convenient, but when you're looking to buy a home, they can become a financial burden," Finch cautioned.
"Taking action now can make a huge difference in your borrowing power."
About Finch Financial Services
Based in Hurstville, NSW, Finch Financial Services has been servicing Australian families and businesses with home, personal and commercial loans as well as asset finance services since 2015. Ranked amongst the top five percent of brokerages in Australia according to data from the MFAA, Finch Financial Services is a leading brokerage and family-owned business that specialises in finding its customers loans that are tailored to their needs and goals.