Can you get a mortgage if you have credit card debt in Australia?

Managing credit card debt does not automatically disqualify you from obtaining a mortgage in Australia, but lenders will scrutinise your credit score and debt-to-income ratio closely. By consolidating debts, increasing payments, and maintaining a responsible budget, you can improve your chances of mortgage approval, as demonstrated by success stories of individuals who effectively managed their debt and secured home loans.

Securing a mortgage is a significant financial step, and for many Australians, doing so while managing credit card debt can seem daunting. Concerns often arise about how such debt could impact the ability to obtain a mortgage. This article aims to address these concerns, outlining how credit card debt affects mortgage eligibility and what strategies can improve your chances of approval.

Understanding Credit Card Debt

Credit card debt occurs when you carry a balance on your credit card from month to month. Unlike other types of loans, credit card debt typically comes with high interest rates and can fluctuate as you make new purchases or pay down your balance. In Australia, many adults use credit cards, but persistent balances can affect one's financial health, particularly when considering a major loan like a mortgage.

How Credit Card Debt Affects Mortgage Eligibility

When applying for a mortgage, lenders will closely examine your financial standing, including any existing debts. Credit card debt is scrutinised because it can significantly affect your credit score and debt-to-income ratio—two critical factors in the mortgage approval process. A high level of credit card debt can raise concerns about your ability to manage loans responsibly and meet additional financial obligations.

Lender’s Assessment Criteria

Lenders assess several aspects of your financial behaviour before deciding on your mortgage application. Firstly, they consider the total amount of credit card debt you carry and compare it to your income, calculating your debt-to-income ratio. Ideally, this ratio should be low, as a high ratio can indicate financial stress and a higher risk of default. Additionally, lenders look at your credit utilisation rate (how much of your available credit you are using) and your payment history. Regularly maxing out your credit cards or missing payments can be red flags for lenders.

Strategies to Improve Mortgage Approval Chances

To enhance your mortgage approval prospects, start by actively managing your credit card debt:

Debt Consolidation

Consider consolidating multiple credit card debts into a single personal loan with a lower interest rate. This can reduce your monthly payments and simplify your finances.

Increase Payments

If possible, increase your monthly payments to reduce your overall debt more quickly. This will lower your credit utilisation rate and improve your credit score.

Budget Management

Implement strict budgeting to prevent high credit card spending and accumulation of further debt. Focus on essential spending and avoid impulse purchases.

By demonstrating financial responsibility and commitment to reducing debt, you can reassure lenders of your capability to manage a mortgage.

Case Studies and Success Stories

There are many Australians who have successfully obtained a mortgage despite having credit card debt. For example, consider the case of Sarah, a teacher from Sydney who had accumulated $10,000 in credit card debt. By working with a financial advisor, Sarah developed a plan to consolidate her debt and systematically reduce her balances over two years. With improved financial stability and a stronger credit profile, she was able to secure a mortgage for her first home.

Another example is Michael, an IT professional in Melbourne, who managed his $15,000 credit card debt by switching to a card with a zero percent introductory rate on balance transfers. He used the interest-free period to pay down the balance without the burden of additional interest, significantly improving his debt-to-income ratio.


While managing credit card debt can be challenging, it does not automatically disqualify you from securing a mortgage in Australia. By understanding how lenders assess credit card debt and implementing strategies to manage and reduce your debt, you can work towards achieving mortgage approval. It's important to be realistic about your financial situation, seek professional financial advice, and explore all available options to ensure that you can commit to a mortgage responsibly and sustainably. Remember, every step taken to reduce your debt not only improves your chances of securing a mortgage but also contributes to your overall financial health.

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