Does my credit card limit affect my borrowing power?

Bayley Clarke · Mortgage broker on the road · Last checked 3 August 2026 · 4 min read

The short answer

Yes, and it's the limit that matters, not the balance. A card you clear in full every month is treated exactly the same as one that's maxed out, because on paper you could draw the lot tomorrow and never pay it back.

My rule of thumb after running these numbers week in, week out: multiply the limit by five and that's roughly the borrowing capacity it's costing you. A $10,000 card you've never carried a balance on is quietly taking about $50,000 off what a lender will advance you.

What your limit is costing you

Card limit	Capacity it costs you	What that's worth in a purchase
$2,000	$10,000	Building and pest, plus conveyancing
$5,000	$25,000Real file	A whole suburb's difference in a regional market
$10,000	$50,000	Two bedrooms instead of three
$20,000	$100,000	Often the whole approval

Dotted figures are indicative examples only, not quotes. Every lender assesses differently and your own numbers move with rates, living expenses and dependants. Green-flagged rows come from a real client file.

Why being good with it doesn't help you

You use the card, you pay it off in full, you've never been charged a cent of interest. By any sensible measure you're handling credit well. The lender's position is: sure, but technically you could draw it all tomorrow and not pay it back, and then you'd have an ongoing repayment we haven't accounted for.

So they assess the worst case. Full limit drawn, minimum repayments forever. Your discipline isn't part of the calculation. Only the limit is. Which also means the fix is unusually simple: it's the only debt on your file where you can change the number with a phone call, without paying anything off.

"But I need it for emergencies"

The most reasonable objection there is. One client put it better than I could:

If my dog gets sick and we've got to go to the vet, or the car breaks down. Those things aren't cheap. You can't just pull that out of your wage when it's already split between rent and groceries.

First home buyer, Brisbane (lightly edited). $5,000 limit, zero balance, cleared every month. It was costing her $25,000.

She's right, and I'm not going to pretend otherwise. Going into a mortgage with no safety net is its own risk. But there are three versions of this and only one of them is cancel it:

Reduce rather than close. Most people carry a limit the bank raised for them years ago. Dropping $15,000 to $3,000 keeps the safety net and hands back roughly $60,000 of capacity.
Keep it and know the cost. If the numbers still work with the card in place, leave it alone. Plenty of people decide the buffer is worth more than the extra capacity, and that's a legitimate answer.
Close it and rebuild the buffer in your offset. Once you're in, the offset does the same job as the card, minus the credit card interest.

If you do reduce or close it, do it in this order

Before the application, not during. A limit change mid-assessment means a reassessment.
Get the closure letter. The card disappearing off your statement isn't proof. Lenders want the provider's letter confirming the account is closed or the limit reduced.
Clear the balance first. You can't reduce a limit below what you currently owe.
Don't close everything at once. A long-held account is part of your credit history. If you're closing several, we'll talk about which ones and when.

Want to see your number both ways?

Half an hour and I'll run it in front of you. With the card, without it, and with the limit reduced instead of closed. Then you pick. If the safety net is worth more to you than the capacity, I'll tell you that's a fair call.

Book a 30 minute call Call 0437 189 939

No application, no credit check, nothing on your file. Just the numbers.

Next question

Does a car loan stop me getting a home loan?

If the card surprised you, the car will wind you. A $21,000 car loan was costing one client around $80,000 of capacity.