Cancel credit card to improve mortgage credit

cuppaciano on 22/11/2017 - 17:21

Currently have an AmEx Platimum Edge, looking to get a Coles Mastercard this month and may cancel the AmEx early next year (before annual fee is due).
Also will need to apply for a mortgage (investment use) mid/late next year.

Will the history of having 2 credit cards affect my credit quota? Or as long as I cancel one/all before mortgage application will be fine?

PS I have adjusted my current AmEx to 7k limit and that got me just through the line to get a pre-approval when I last applied early this year. However as I ended up putting deposit to a off-the-plan, that pre-approval won't be valid anymore and need reapply.

Financial

Comments

  • HighAndDry on 22/11/2017 - 17:24
    +4

    The number of credit cards you had in the past isn't a factor unless you were late in paying them/defaulted on them.

    What the approval/pre-approval process looks at is your total potential current liability at the time of the application (e.g. if you have a CC with $20k limit, it'll treat it as worst case scenario that you could rack up a $20k debt when your loan is drawn down).

    Obviously if you have a mortgage broker/banker, talk to them as well, but that's my understanding of it.

    • enzioFirenze on 22/11/2017 - 17:31
      +1

      this is exactly right, I lowered my limit and cancelled a CC as well

    • cuppaciano on 23/11/2017 - 10:05

      Thank you! I don't intend to take credit from the credit card beyond my monthly expenses budget. So I never had any issue repaying (I usually pay within a week of the statement in full).

      I suppose then, as long as I cancel the CC/lower the limit before the application then it won't be an issue? Although the approval might taken consideration that I had 2 cc before the application?

  • CheapskateQueen on 22/11/2017 - 22:52
    +1

    In terms of your borrowing capacity, so long as you close it before applying, they won't factor your previous CC limit.

    Though if your borrowing capacity is that tight maybe you need to review your purchase. They factor your future rent from the property for investment loans, so that should put you in a good position.

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