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Consumers embracing pay-later options

Australians are making increasing use of credit cards and buy-now-pay-later services, which could potentially have implications when they make home loan applications.

Credit card applications in the June 2022 quarter were 6.0% higher than the June 2021 quarter, according to Equifax, one of Australia's big three credit bureaus.

Buy-now-pay-later (BNPL) applications jumped 42.2% during the same period.

Lenders look at this kind of spending behaviour when they assess home loan applications. With credit cards, lenders generally assume you’ll use your entire credit limit each month, even if you use only part of it and always pay your bills on time. That can affect your borrowing power. So if you wanted to raise it, you could either reduce your credit limit or cancel your credit card and pay by debit instead.

BNPL use can also affect your borrowing power, because lenders may wonder how much of a mortgage you could be trusted with if you make a lot of non-essential purchases and seem unable to pay for them in full at the time. So to protect your borrowing power, you could either reduce your BNPL use or stop it altogether.


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