Reducing Credit Card Limit and Then Increase It after New Home Loan Is Approved

• • 

    JIMB0 on 13/08/2024 - 07:32

    +12

    How long ago did you do this? These days they can see all your active lines of credit through the credit reporting agency and will question it if you don't list them all on your application.

    • 

      Porker on 13/08/2024 - 09:42

      My latest loan was September 2023.

      As explained in the original reply and subsequent, this is the technique used by my bank (and sounds like only!) to approve my loan requests.

      I have multiple mortgages with them though so there's the possibility of them just trying to assist with the paperwork.

  • 

    JimmyF on 13/08/2024 - 08:58

    As such, the bank never sees the credit card transaction and doesnt accordingly request any information about it.

    So your answer is to lie on your application and not tell them about your other credit cards / loans even when they ask.

    • 

      Porker on 13/08/2024 - 09:39

      -2

      The bank I was borrowing from told me to do this. I do have multiple mortgages though with them so in part it may be motivation to retain me as a customer of theirs.

      But ultimately I guess I could just cancel the card or lower the limit and then get a new card after loan approval.

      • 

        JimmyF on 13/08/2024 - 12:08

        -1

        The bank I was borrowing from told me to do this

        The bank or your broker?

        Either way, you are making a false claim on your credit application.

        • • 

            JimmyF on 13/08/2024 - 14:27

            -1

            @Porker:

            Clearly there's disagreement between what you believe should happen

            Not at all, I've applied for loans, they ask you to list all your income as well as credit cards and debts as part of reviewing if you can pay back the loan.

            Your 'hack' is to hide the debt payments, why are you hiding them? So the company offering the loan isn't aware of them. No other reason.

            so yeah I don't believe your bank advised you to do this legally as claimed or if they did, its one dodgy loans officer who just wanted the commission.

            You see this behaviour with brokers, its why people use brokers as they 'adjust' the truth until your loan is approved.

            • 

              Porker on 13/08/2024 - 15:37

              -1

              @JimmyF: I guess it's who you know in the world.

              My bank's loan manger advised me and assisted me with multiple loans, but I appreciate that we're not all treated equally.

              • 

                JimmyF on 13/08/2024 - 16:20

                @Porker:

                My bank's loan manger advised me and assisted me with multiple loans, but I appreciate that we're not all treated equally.

                LOL I see you removed all your comments, but your hack would class your loan application as dishonest and fraudulent in most cases if you haven't answer the questions truthfully, regardless of what your manager advised you for being a 'special' customer.

                Put it this way, if your bank didn't care like you claimed, why are they asking you to 'hide' your credit card payments out of a different account and then not tell them about it during the loan application? Have a think about that for a bit.

                • 

                  Porker on 13/08/2024 - 17:01

                  -1

                  @JimmyF: Again, it's who you know in the world so I've removed the comment as it is clearly an item that benefits me and my situation only, and doesn't apply to (for example) you and/or your experiences.

                  It appears you have great difficulty in acknowledging that another might do something different from your experiences to help someone out, and that's something I can't/won't argue. I don't know you so have only been informing on what I have done.

                  In any event, again, the comment was removed as it is off-the-books assistance not available to all, and something which that manager has greatly assisted me on for a number of loans now. Potential lesson for me is to keep quiet all the things that get me ahead whether off-the-books tax accountant advice, and/or getting 'mates rates' or benefits for other things.

                  • 

                    JimmyF on 13/08/2024 - 18:43

                    +1

                    @Porker:

                    It appears you have great difficulty in acknowledging that another might do something different from your experiences to help someone out, and that's something I can't/won't argue. I don't know you so have only been informing on what I have done.

                    It appears you have great difficulty in acknowledging that you might not be doing the right thing trying to 'hide' your credit cards from your loan applications.

                    A bank telling you to 'hide' your credit card payments out of a different account and then not tell them about it during the loan application isn't playing by their own loan application rules and its odd you can't see that as being an issue.

                    If they don't care like you claim, why hide it in the first place and ask you to make a false claim on your credit application?

                    • 

                      Porker on 13/08/2024 - 19:03

                      @JimmyF: I think you'll agree there's no point in this discussion.

                      If it at all assists in resolving, I know the reason why the credit card information is hidden as their internal process is to review statements initially, as earlier replied. If they ran a normal credit check, you are right in that they'd see my credit cards. There is indeed more to my situation than revealed within this forum. But given my situation is unique, I will not comment further nor share information which is also partially why I removed the original response.

                      You provided context that one should follow all the rules in life. I won't challenge that further.

                    • 

                      Porker on 13/08/2024 - 19:41

                      @JimmyF: +1

  • 

    sghetti on 13/08/2024 - 12:03

    +4

    Definitely don't do this in general, unless your intention is to close the card when getting formally approved. Most lenders will check your credit file and see credit cards either open, or that you've applied for them. If your intention is to lie, they'll more than likely catch you and possibly deny a loan or pre-approval. Leading to another enquiry on your credit file and subsequent banks possibly asking questions about that enquiry aswell.

    I recently applied for a home loan, with multiple cards open, but stated I had none open. When queried, I advised them I intended to close the cards once I understood my borrowing capacity with and without them. Which was totally fine, and when seeking formal approval they just needed the letters from the card providers that the account had been closed.

    Credit cards in general from a loan perspective, will be treated as if you have the entire limit maxed out and you're paying it off with interest. They can also hurt your borrowing capacity significantly. In some cases, $50-60k per $10k of credit you have open.

  • 

    burningrage on 13/08/2024 - 15:14

    +2

    Most importantly, don't share about this sort of thing online or here as it will draw attention to banks.

    When I last submitted a new credit card application, they already have information as to what cards do you currently have (which makes me think why bother asking then) BUT they got it wrong. One of my old cards has already been closed but still showing open in their systems.

    • 

      Porker on 13/08/2024 - 15:33

      Yes indeed. Will keep my benefits quiet in future.

    • 

      JimmyF on 13/08/2024 - 16:22

      Most importantly, don't share about this sort of thing online or here as it will draw attention to banks.

      I think the banks know already, they are not that silly, as you said

      they already have information as to what cards do you currently have
      One of my old cards has already been closed but still showing open in their systems.

      Happens, sometimes the account isn't closed out fully for whatever reason. But as you said, they know… Even if you try to hide it.

• 

  star-ggg on 13/08/2024 - 08:23

  On of my cards lets me decrease the limit online and explicitly states there's a waiting period of 1 year before I can up the limit again. Could be bank dependent.

  • 

    sghetti on 13/08/2024 - 12:05

    All credit card providers have to legally offer an easy way to decrease your limit these days. And are not allowed to offer a simple way to increase your limit.

• 

  JimmyF on 13/08/2024 - 08:59

  +1

  Reducing Credit Card Limit and Then Increase It after New Home Loan Is Approved

  Yes nothing stopping you getting a new credit card or increasing the limit once your loan has been approved and taken out.

• 

  WoodYouLikeSomeCash on 13/08/2024 - 09:03

  Amex is pretty flexible (not sure if that’s your bank). Commonly, if you had a limit of $7K for example, they’ll increase it significantly to like $25K if you request it. You need to have an excellent repayment history with Amex though.

• 

  theHMASfriendship on 13/08/2024 - 09:24

  The only limit is your imagination, dare to dream tooblue

• 

  Mulga Bill on 13/08/2024 - 09:35

  +1

  The bank will likely use 4% x limit to get your CC repayment. This eats into your home loan borrowing power.

  Some banks auto approve a credit card with a home loan but then there would be no point reducing the limit because it is factored into your affordability

  Home loan application will show on credit report as soon as they do the credit check i.e. before approval.

  If you are hoping to apply for a credit card before that bank finds out about your home loan I assume you want to do this because you cant afford both…then don't do it!…

  Generally there is a question re: "Any change in future circumstances that might impact on your ability to make repayments?" so you probably are not telling the truth

  Even if the home loan did not show on credit report the lender will likely ask where you are living and what rent/home loan you are paying? if no rent or home loan they will likely look into it further…

  Hope this helps

• 

  freefall101 on 13/08/2024 - 11:35

  It could take some time for the home loan application to show on the credit file even if the credit card provider does credit check?

  I assume the credit card company will see all the home loan credit checks against your file. If they ask, you probably shouldn't lie to them about it.

• 

  Devastator0 on 13/08/2024 - 13:13

  The one big thing my broker told me about credit cards and home loans is that if you want to be more easily approved for a home loan, don't have a credit card at all (She explicitly told me it doesn't matter if you've never missed paying it off or just keep one "for emergencies"). Banks just consider it too much of a financial risk/bad debt linked to you so it's one of the things that marks you down for a home loan.

  • 

    burningrage on 13/08/2024 - 15:15

    -1

    "She explicitly told me it doesn't matter if you've never missed paying it off or just keep one "for emergencies"

    Which makes a mockery of the reason why we have credit score in the first place if they are not going to draw faith from that.

  • 

    JimmyF on 13/08/2024 - 16:26

    +3

    Banks just consider it too much of a financial risk/bad debt

    In the banks eyes, they treat your 'limit' as high interest debt regardless of the balance or history. As any day you can turn around and max out your credit card, having to service the high interest debt etc as well as the loan etc.

    • 

      burningrage on 13/08/2024 - 17:51

      -1

      May be true but that means this applies to even to the most financial savvy or financially disciplined customers which once again, makes the mockery of the purpose of Credit History in the first place…. to separate between good and bad credit holders.

      This is why Responsible Lending law is hated by everyone but the banks. You would recall the story of a NAB customer who was refused home loan for 3c unpaid credit card balance that the owner was not aware of.

      • 

        JimmyF on 13/08/2024 - 18:38

        this applies to even to the most financial savvy or financially disciplined customers which once again, makes the mockery of the purpose of Credit History in the first place…. to separate between good and bad credit holders.

        Not at all, its about you being able to repay your debts regardless if you use that debt or not. Otherwise 'good' credit history people can take out an endless line of credit via credit cards as they haven't used any of it, then go on a credit fuelled debt binge which they can't repay.

        A good credit score allows you to take out loans once existing debt has been paid. A credit card is classed as debt regardless of balance.

        If you had been going to lend money, would you lend it to someone who has no track record of repaying debt or to someone who has paid their bills on time and paid off debts etc?

        This is why Responsible Lending law is hated by everyone but the banks

        I don't hate it, I think it is too weak. People are borrowing more than they can afford, its why everyone is crying that interest rates are too high as they committed on borrowing thinking it would stay low forever.

        • 

          burningrage on 13/08/2024 - 21:28

          -2

          @JimmyF: Appreciate the opinion but I think you are mistaken but we'll see how this will go down in history.

          • 

            JimmyF on 13/08/2024 - 21:44

            @burningrage:

            Appreciate the opinion but I think you are mistaken but we'll see how this will go down in history.

            Mistaken? Ok I'll bite, how so? Do share your view on how it should work?

            I'm guessing, banks should be handing out loans and credit cards like lollipops not factoring in other debts you have to pay on your income?

            Maybe have a look at why the Responsible Lending laws had to be created in the first place and what it was addressing.

            You also didn't answer who you would lend money to from my earlier post. So who would it be?

  • 

    WoodYouLikeSomeCash on 15/08/2024 - 17:41

    +1

    That’s why you get a charge card instead.

• 

  Bargainitis on 13/08/2024 - 17:15

  Just a FYI in case its relevant for you, the Amex Platinum Charge card seems to have its own process and not always seen as "Credit".

• 

  UFO on 14/08/2024 - 09:46

  OP, definitely no option for "more flexible" when it comes to re-upping your credit limit.
  Responsible lending laws now prevent people just getting easy increases by ticking a box saying you can say the new balance.
  You used to be able to do that- I once had a single $30k credit card limit that I had no business having, that over the years I just increased when the offers came along in the mail!

  Credit cards are a massive sink to your lending capacity due to their potential to cost you a lot of money at very high interest.
  For every $10k card you have, it's about $100k in lost lending ability.
  A couple with two cards lose $200k straight up!

  If you're going for a house loan, pay off and cancel the card completely. It takes a couple months for that process to finalise (firstly with the bank itself- they inactivate the card but they don't close the account proper because of automated payments and the like). Then they notify the credit rating mobs after a few months that the account is properly closed.
  When applying for a new house loan, make sure you include proof of the closure… so they don't include the card in their assessment unfairly.

  Once you've secured your new house loan, then apply for a new card (it would be better at a different lending institution as they want your new business).