Australian consumers are slowly but surely reducing their reliance on credit cards – and the benefits go well beyond avoiding high-interest debt. According to the Reserve Bank of Australia (RBA), the number of personal credit cards in circulation was 1.7% lower in July compared to the year before, while the amount of credit card debt accruing interest dropped by 0.4%.
This shift in behaviour is not only strengthening household finances but also improving the way borrowers look in the eyes of lenders. For anyone preparing to apply for a home loan, reducing credit card use can make a noticeable difference to your borrowing power and approval chances.
Why Fewer Credit Cards Can Strengthen Your Home Loan Application
While it’s possible to get a mortgage with credit cards, lenders tend to look more favourably on borrowers with lower credit limits – or none at all. Here’s why:
1. Safer profile for lenders
The less debt you carry, the less risky you appear. Banks and lenders want to see that you’re responsible with money, and reducing credit cards is a simple way to show financial discipline.
2. More borrowing power
Credit cards – even if you don’t use them – can impact how much you can borrow. That’s because lenders often assume you could max out your limits at any time. Fewer cards or lower limits means the bank may be willing to lend you more towards your home loan.
3. Easier to manage
The fewer cards you juggle, the easier it is to stay on top of your finances. Lenders like to see stability and simplicity – two things that go hand-in-hand with a lower reliance on credit cards.
How Credit Card Use Affects Your Mortgage Strategy
If you’re planning to buy property, every dollar of borrowing power matters. By reducing or even cancelling unused credit cards, you’re not just saving on fees – you’re also potentially unlocking extra capacity to bid on your dream home.
This doesn’t mean you should never have a credit card. For some people, they provide convenience, rewards, and flexibility. But when it comes to home loan applications, less is usually more.
Preparing for a Home Loan? Here’s What to Do
- Review your current credit card limits and balances
- Cancel any unused cards or reduce unnecessary limits
- Track your spending and savings to show strong financial habits
- Speak with a broker or lender about how your credit profile will be assessed
The Bottom Line
With credit card use trending down across Australia, borrowers are putting themselves in a stronger position to manage money and secure finance. Cutting back on credit cards could be the small step that gives your home loan application the big tick of approval.
📲 Thinking about applying for a mortgage? Get in touch today for guidance on how to manage your credit profile and maximise your borrowing power.
