Hello all,

First a little background on myself I am the field supervisor for an oil and gas well service company I live in northern british columbia and am 22 years old. I'm planning to buy a home in the late spring after a year of building my credit from non existent to 700. Today I called my bank to ask for a credit card increase and after I gave them my income this year they offered me their top credit card with a limit 3000 more than I had asked for. My question is that will increasing my potential debt lower my chances for getting a mortgage in the spring.

Thanks in advance

P.S I also have 47000 dollars debt due to my truck

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Learning to live without debt is more helpful than "building your credit".

 

You owe too much already. Cancel the credit card.  Sell the truck.

 

JB

well the truck is a work truck and it nets me approx 4000 a month and the company makes the payments even if were having a slow month the truck is in my name

Risky.  If the company defaults you're stuck with it.  The truck is worth more than you make in a year.  You don't make enough to own a $47,000 truck.  Let the company put it in their name.  That way, if they go bankrupt, you don't go with them.

 

I'd be hesitant to take a $48K job that came with a $47K debt.


JB

by the end of this year I will gross about 100k though and the company has grossed about 1.3 mill as well as the job is extremely secure in that in order for me to be laid off or fired they need full board approval and I'm on the board as well as I'm very close to the owners and other board members even if i dont work for an entire year I will gross 45000

I suspect pinning their debts on employees helps their balance sheet.  They might not be as secure as you think.  If they were ... they could just buy the truck outright rather than saddling you with a gigantic truck debt on an asset that's dropping-in-value like a rock.

 

Either way, you're still stuck with a truck you can't afford if something goes wrong.  Even if nothing goes wrong, the truck will probably hurt your credit -- and your mortgage chances -- more than this credit card thing.  You're probably overleveraged with the truck alone.

 

JB

I had an offer to take a company truck however they don't pay the driver a driving rate so yes having the truck is a risk which I weighed against the income potential for example right now I'm on a site that was 317km from our office and ill be out here for 10 days from the hotel I'm staying at to site is 90kms each way I get 1.00 per km so after these 10 days just driving will earn me 2254 which is untaxed

in addition to my personal day rate of 250 dollars a day on top of my normal salary 2500 a month and truck allowance of 750 a month

Your debt to income ratio is ~45%.  You're pushing the boundaries of what a bank will loan you, even without the mortgage.

It also won't help your credit, and may hurt it.  There's a lot of long division involved, but credit companies use algorithms which look at the percentage of debt you have against the credit you have.  Keeping the same debt, while increasing the credit, will skew that percentage.  Likewise, lowering your credit limit will skew the percentage.  To maximize your credit score, you want to keep your debt within that sweet spot.

Cancelling all your credit cards will lower your credit score.  Having a lot of credit cards which are unused, will lower your credit score.

I don't know how these things work in Canada. South of the border, higher access to credit generally means a higher credit score, generally means even more access to credit. If you're playing the credit score game, you want as many credit cards with as high of limits as you can get, you just don't want to actually be carrying the debt. Actual consumer debt (credit cards, car loans, etc.) doesn't help you.

In other words, to answer your question, increased DEBT will lower your chances of getting a mortgage (more debt) but increased CREDIT will raise your chances.

But "game" may be a good word here, because it's not enough to know the "rules," you have to have your head in it. Too many people think credit limits were meant to be reached and can't handle consumer credit. If you don't know the difference between debt and credit, if you carry a balance on your credit card (ever), you're probably in the "can't handle" camp. If your finances are clean, if increasingly complex, if you don't carry a credit card balance, if you understand this post, you may be in the "can" camp.

I take it the truck is like a uniform or other work tools? Employer more or less requires you to have it, but has pay arrangements to cover it? Unless it's a commercial vehicle (bigger than a pick-up), $47,000 sounds like you bought the whole thing on credit, which is not the way to buy anything, particularly a rapidly depreciating consumer good like an automobile. But if it's necessary for work, I can kind-of see it as like a student loan, as a moral/prudential matter, though the banks won't.

Yeah Its a tool for us we haul trailers and travel on roads that are to say the least dangerous my company required my to half a half ton or better preferably a 3/4 ton and less than 5 years old I thought about buying used but due to the area I live in even if a truck has less than 70 000kms and is say 3 years old that truck ran almost constantly all winter so huge engine hours which means it will likely break down more and have costly repairs as well as lost income cause it is in the shop my truck is a 2012 chevy 2500hd is 11 months old and has almost 40 000kms on it cause i am always on the road its not uncommon for me to drive 1400kms in a week

Well, have you seen "The Bicycle Thief"? Was it prudent for that guy to pawn his bed sheets so he could redeem his bicycle so he could work? Yes. But it put even more eggs into the one basket and didn't work out too well for him when the bicycle was stolen and he had no job, no bicycle, and no sheets.

I suspect that this thing with the truck, and your whole employment situation, is a Canadian quirk. Something about business, but not personal, assets being taxed, different tax treatment of a vehicle allowance v. flat higher pay, a way for you to acquire an asset but not have the high income and resulting higher taxes. I can guess but don't know.

Why'd you ask for the increase to begin with?

Again, south of the border, you can pre-qualify (or not) for a mortgage, and also meet with advisers, sometimes for free, about the credit score game. In pre-qualifying, you fill out a mortgage pre-application, and the bank tells you what amount you'll qualify for. I've had friends who were told, "Raise your credit score X points, and then you'll qualify" or "You'd get a better rate if you did Y." At this stage, I'd say your questions should be directed towards the people who will be reviewing your mortgage application.

yeah I understand what your saying how work trucks here is apparently odd my truck is defined as a work expense so when tax time comes around I can claim about 80% of everything I spent on it including insurance payments and fuel and if the company does fold or i get laid off or fired my payments are made by the insurance company until I get sufficient work again and If the truck is in an accident and is a write off I receive the original cost of the truck back and as far as asking for an increase the main reason is that the limit on it was 1000 dollars which does work but since I only really use it for fuel I find that I'm constantly putting money on it which again isnt a big deal until your in an isolated area and cant transfer money and your card is maxed out so larger limit I wont have to toss a couple hundred on it every week I can just pay it off at the end of the month

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