You pay your credit card off in full every month and owe nothing. So why does it reduce how much you can borrow? Because lenders assess the limit, not the balance.
How lenders assess credit cards
Lenders assume you could max out your card at any time. They treat a portion of the limit as a monthly repayment, typically 3% to 3.8% of the limit, whether or not you use it.
| Card limit | Assessed monthly repayment (3.8%) |
|---|---|
| $5,000 | $190 |
| $10,000 | $380 |
| $15,000 | $570 |
| $25,000 | $950 |
What that does to borrowing power
At current assessment rates (around 9.5% including the 3% buffer, over 30 years), every $100 of monthly commitment reduces borrowing power by roughly $11,000 to $12,000.
So:
- A $10,000 limit can reduce borrowing power by around $45,000
- A $15,000 limit by around $68,000
- A $25,000 limit by around $113,000
That's often the difference between getting the home you want and missing out.
What to do before you apply
Close cards you don't need
Store cards, old cards and backup cards all count. Close them.
Reduce limits on cards you keep
If you only spend $3,000 a month, a $3,000 or $5,000 limit is plenty.
Get written confirmation
Lenders want evidence that a card has been closed or reduced. Ask your bank for a letter or screenshot showing the new limit.
Do it early
Card closures can take a few days to show. Do it before you apply, not during.
Does closing cards hurt my credit score?
Closing a card generally has little impact on your score, and lowering your total available credit can be viewed positively by lenders. The bigger risk is late payments, not closures.
What about BNPL and store credit?
Buy Now Pay Later accounts and store finance (like interest-free furniture deals) can also count. Some lenders treat BNPL limits like credit cards. Close accounts you don't use.
Rewards cards
If you love your points, you don't have to give them up. Just reduce the limit to what you actually need.
A real-world scenario
Ella and Marcus earn $180,000 combined and are pre-approved for $820,000. They have three credit cards with a total limit of $30,000. By closing two and reducing the third to $6,000, their assessed commitments drop by over $900 a month, potentially increasing their borrowing power by around $100,000.
Frequently asked questions
Do debit cards count?
No. Only credit facilities.
Do lenders count my business credit card?
If you're personally liable, often yes. If it's in a company's name only, it may be treated differently.
Can I get a new card after settlement?
Yes, but be sensible. Lenders can check your credit until settlement.
Want to know how much your cards are costing you in borrowing power? Call Finfident on 0424 545 654 and we'll run the numbers.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.