resi mortgage corporation pty limited ABN 61 092 564 415
Level 3, 458 Wattle Street, Ultimo NSW 2007
Tel 02 9280 0007 Fax 02 9280 0009 E-mail save@resi.com.au PO Box 12 Broadway, NSW 2007
MEDIA RELEASE
DECEMBER 22, 2009
LENDER WARNS CONSUMERS ABOUT CREDIT LIMITS
AND THEIR EFFECT ON BORROWING CAPACITY
Leading non-bank lender Resi Mortgage Corporation has issued a timely warning to consumers on the hunt for
a home loan to lower their credit card limits before the sale season, not only to curb the temptation to spend but
because of the longer term effect high credit card limits can have on borrowing capacity.
Resi’s Head of Consumer Advocacy, Lisa Montgomery says consumers should be aware there is a direct
correlation between the limit on your credit cards and the limit you can borrow for a home loan, warning that
even if you don’t use the high limit attached to your card - simply by having it available, a lender will assume
you can potentially use that maximum amount, revising down your loan capacity accordingly.
She says:” While many people understand they need to reduce their debts before they start looking for a home
loan, some still don’t understand the significant difference that lowering individual credit card limits can have on
increasing their borrowing capacity.”
Montgomery explains that lenders will assess a borrower’s loan application based on a variety of factors, but
when they see high credit card limits, they view it as a greater chance of that borrower getting into financial
difficultly and their borrowing capacity is therefore reduced.
She says” A lender doesn’t take into consideration what you owe on your credit card and that payment, but
rather it’s the limit and the payment the borrower could potentially be liable for if they borrow to the max. For
example, a borrower may only owe $1000 on a limit of $15,000, but lenders must assume that the borrower
can owe that $15,000 the day after settlement, placing them in a potential hardship position.
Montgomery says that is why now is the best time to look at the limits on your cards and take action to reduce
them, before you’re tempted to use the credit, simply because the facility exists.
“Reducing credit card limits before shopping around for your loan can mean the difference between tens of
thousands of dollars on what you can borrow – and in a climate of rising interest rates and rising property
prices, this factor alone can make a dramatic difference to a borrower’s options,” she explains.
Montgomery says there are two key areas that can affect a borrower’s credit profile. Firstly, the way in which all
their past and present credit arrangements have been managed, and secondly, that even an enquiry to obtain
credit for a card or a loan, may end up on their credit profile.
She says: “A borrower’s credit rating is one of the most important criteria lenders look at, along with the loan to
value ratio (LVR) and the borrower’s ability to service the loan and if there are any chinks in the armour, it could
affect the home loan application.
It’s therefore a must for any borrower to look at their credit limits and generally do an audit of their credit
situation before they start the home loan process - and with a New Year looming and the temptation of an
indulgent spending period just around the corner, there’s no better time to do it.”
ENDS
Media Contact:
Lisa Montgomery, Head of Consumer Advocacy,
RESI Mortgage Corporation: (02) 8204 5012 or 0414 592 553
Karen Bristow – Kardan Consulting 02 9967 3245/0414 320 146
NEWS 
