# Does having more credit available makes it difficult to get a mortgage?



## tavogl (Oct 1, 2014)

Does having multiple credit cards and lines of credit makes it more difficult to get a mortgage? 

I have 3 credit cards, 50k in total limit, one line of credit of 25k. My wife has 4 CC, 40k limit in total, credit line of 20k (and she makes significantly more money than me) weird. 

We have combined salaries of 130k (I expect my income to increase 10-20k next year)

I was just told by an RBC teller than having alot of available credit will make it more difficult to get a mortgage or big loan, as the banks take into account our available credit somehow and put that into the equation to see how much they would borrow us. 

I have a credit score of 787, my wife a bit higher, we have no debt other than the car. 

Should I be worried? We want to buy our first home sometime next year

Thanks


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## Daniel A. (Mar 20, 2011)

Yes it will likely be an issue, having a good credit score won't matter the fact is you and your wife have the ability to become overextended well beyond the comfort of any lender.


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## Just a Guy (Mar 27, 2012)

It depends on the size of the mortgage you're looking for. Banks look at your ability to service your debts. They look at the worst case scenario, if everything were maxed out. It's not the only criteria, but it is one of them. You have $135k in credit, most banks will lend around 6.25x income, giving you a maximum of around $812,500 in lending...you'd probably qualify for around 600-650k mortgage without this aspect being an issue. If it's a real problem, the bank can ask you to close off some of your unsecured loans as part of the conditions. As a side note, even if they ask, they rarely check to see if you actually did do it.

Of course, the criteria used to determine what qualifies your ability to replay changes all the time, and depends on the type of mortgage you need (conventional vs. Cmhc insured for example). Also, not all banks are the same, heck, divisions in the same bank have different criteria. You can, for example, be denied a mortgage from your bank, then get a mortgage from that same bank by talking to a "mobile mortgage specialist" (or whatever their title is), or get one from the wealth management division (if you qualify), or the small business division, or the agricultural division (again if the property qualifies)...and this is all the same bank, each bank and credit union may have similar divisions to try, each with different criteria, and we haven't even talked mortgage brokers and third party lenders, or interprovincial lending...

There are a lot of options out there that most people never even know exist.


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## sags (May 15, 2010)

The banks will issue a mortgage, but will want all the credit cards and credit lines closed and you will have to supply proof or have them close the accounts. 

$135,000 unsecured credit would be an extreme amount for a couple earning $130,000 a year.


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## Rusty O'Toole (Feb 1, 2012)

Up to 4 credit cards no problem, and if they have a 0 balance they don't count. One time a bank told me I had too many credit cards, they would only give me a mortgage if I cancelled one, so I cancelled the one I had from them. They gave me the loan. It doesn't have to make sense, it only has to be the rule.

Have gotten mortgages with multiple lines of credit and credit cards. I found it best to consolidate everything onto my house mortgage and smilingly tell them I had no debt other than that. This seemed to make them happy. This was when I was borrowing to buy investment property.


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## ian (Jun 18, 2016)

The fastest way to get an answer on that question is to call a mortgage broker or ask that question to the mortgage officer at your bank.


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## marina628 (Dec 14, 2010)

My friend had about $120,000 in credit card limits owing under $5000 while making $130,000 a year He applied for his first mortgage of $268,000 and the bank made him close $65,000 worth of the credit cards and assumed he will max the remainder adding 3% of available credit into the debt factor.


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## Eclectic12 (Oct 20, 2010)

Rusty O'Toole said:


> Up to 4 credit cards no problem, and if they have a 0 balance they don't count ...


I wonder when they changed this.

For my first mortgage, I only had one CC with zero balance. It was rarely used and always paid off (was building my credit history). 

When I obtained five offers for my mortgage, one was something like $60K lower. When I asked about it, the only bit the clerk could find was that where I had listed an $800 limit on the CC - the credit report had a much larger number. Based on the number, it was my outstanding debt for my car loan.


Cheers


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## OhGreatGuru (May 24, 2009)

You have to ask yourself "Why on earth do we need 7 credit cards?". I realize in the modern age spouses may need some separate credit card accounts, because in joint accounts only the primary cardholder accumulates any credit history. But 7? Simplify!


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## dougbos (Jun 4, 2012)

The problem is that it was a teller offering advice. As has been mentioned it is best to talk to a person with the bank who deals solely with mortgages or a mortgage broker. The normal practice for a lender when you are applying for a mortgage is to look at the balance owing on each portion . If you have no debt at all then your debt ratio is not affect. If you have a balance of let's say $20000 3% of that ($600 a m0nth ) is added to your debt ration. It is your debt ratios and incomes that determine the amount of a mortgage that you could qualify for. Your credit scores are fine.


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## razz (Oct 21, 2014)

I also have more than 4 credit cards. When one cancels a particular credit card, does the credit history associated with it is also canceled? Which credit cards do you suggest cancelling the newest and leave the oldest, does it matter?

Also does cancelling a credit card affect ones credit score?


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## redsgomarching (Mar 6, 2016)

anyone saying that the open no balance credit cards do not affect applications are wrong. 
even at no balance it is mandatory for lenders to include a few case scenarios on your credit which all depend on credit available. different products have different rules (credit cards was 2% of limit, LOC was 2.5%). These numbers will be included in your debt servicing ratio which indicates if the loan is suitable. A lender may mitigate this by asking yo uto close the cards or lower the limits.


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## dougbos (Jun 4, 2012)

razz said:


> I also have more than 4 credit cards. When one cancels a particular credit card, does the credit history associated with it is also canceled? Which credit cards do you suggest cancelling the newest and leave the oldest, does it matter?
> 
> Also does cancelling a credit card affect ones credit score?


Part of your credit score is determined by the 2 factors that you mentioned. Generally the older the credit card the more favourable it is. It shows that you can manage credit responsibly. Another factor is based on your credit utilization. If for example you have 2 cards each with a 10000 limit. One carries a balance of $0 and the other is $7000. You have $7000 debt over $20000 or you have used 35% of your available credit. If you cancel the $0 balance card you now have used $7000 of your available credit or 70%. This will impact your score more than the 2 open ones would.


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## tavogl (Oct 1, 2014)

Hi,

Thank you all for your replies! after reading all this we've decided to not pay much attention to the CCs until we find the perfect home and decide to pull the trigger and buy a condo. In the mean time we'll keep using our CCs for everything and pay them before the end of the month , and keep collecting rewards.

If the bank does ask us to close a couple of CCs that's fine too, not a big deal. we keep them 0 balance, never pay interest on them, just use them for the rewards

Regards


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## dougbos (Jun 4, 2012)

redsgomarching said:


> anyone saying that the open no balance credit cards do not affect applications are wrong.
> even at no balance it is mandatory for lenders to include a few case scenarios on your credit which all depend on credit available. different products have different rules (credit cards was 2% of limit, LOC was 2.5%). These numbers will be included in your debt servicing ratio which indicates if the loan is suitable. A lender may mitigate this by asking yo uto close the cards or lower the limits.


When an application is being prepared to submit to a lender for approval a credit card with a balance will have 3% of the balance added into the liability section. If there is no balance no amount is added to the liability section. After submission the lender may have other ways of assessing the credit capacity of the applicant. Obviously someone with a large debt load will be carefully scrutinized.


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