How Can The Client’s Borrowing Capacity Be Improved?

If your clients are unsure of how to start taking steps to improve their borrowing capacity, here are a few helpful ways they can begin! 

1. Close credit cards
2. Pay off debts (including high-interest rate debts)
3. Lower high credit limits
4. Save for a larger deposit
5. Create another stream of income

Closing unnecessary and unused credit cards is a great way for your clients to begin improving their borrowing capacity. Most lenders will consider active credit cards to be drawn to their limits and factor in the monthly repayments, reducing your client’s borrowing capacity. 

A client can work to pay off their personal debts, including high-interest rate debts, increasing their borrowing power. Making large payments during interest-free periods is a great way to begin decreasing debts.

Advising your clients to lower high credit limits is another way to easily begin increasing borrowing power. Let’s say your client has 3 open credit cards with each limit equalling $10,000. Banks and mortgage brokers will consider credit cards as a debt of $30,000 which can significantly affect their borrowing power. Reducing those credit limits (or better, closing the credit cards completely) is vital to ensuring your client can obtain their desired borrowing power.

Saving for a bigger deposit will allow your clients to pay less in interest and monthly repayments while also increasing their borrowing power through securing a consistent saving record. 

A client who creates an additional stream of income can increase their borrowing capacity. Taking on additional shifts, finding an easy side job, saving tax returns, or negotiating with their employer for a raise are just a few ways that allow an individual to easily create an additional stream of income.