I pay my credit card off every month. Why does it reduce my borrowing power?
Because the lender is not assessing what you do; it is assessing what you could do. A credit limit is money you can draw tomorrow, so lenders treat it as though it were fully drawn and count a monthly repayment of roughly 3.8 per cent of the limit. A $15,000 limit becomes a $570-a-month commitment in their model, which is about $120,000 of borrowing capacity at current assessment rates.
The fix is administrative, not financial. Reduce the limit to what you use, or close cards you do not need, before you apply. Do it a few weeks ahead so the change shows on your credit file. Keep one card if you rely on it for travel or emergencies; it is the total limit that matters, not the number of cards.
Buy-now-pay-later accounts and store cards count the same way, and lenders now see them on your statements.
Want the number for your situation? The refinance check asks the same questions Joshua would and shows the working.
Run the refinance check