When applying for a home loan in Singapore, most buyers focus on interest rates, loan tenures, and TDSR. But there’s another factor that plays an important role behind the scenes — your credit card behaviour.
Many clients often ask:
“Is it better to have a credit card or not have one at all?”
The answer isn’t as simple as “yes” or “no”. Banks don’t just look at whether you have a credit card — they evaluate how you manage it.
In this comprehensive guide, we break down how credit card usage affects your loan approval, and who banks ultimately prefer as borrowers.
Why Credit Behaviour Matters for Home Loan Approval
Banks want to lend to people who have a clear track record of responsible borrowing. Your credit habits give them a glimpse into how you will manage a large long-term commitment like a mortgage.
Two important indicators they look at are:
✔ Your credit score
✔ Your total debt obligations (which affect TDSR)
Credit cards play a major role in both.
Borrowers With Credit Cards — Pros & Cons
Having a credit card is NOT bad — banks actually prefer applicants who can demonstrate discipline and payment reliability.
✔ Pros — Why Banks Prefer Borrowers With Credit Cards (If Managed Well)
1. Established Credit History
A healthy credit card record helps banks assess:
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Your reliability as a borrower
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Whether you repay on time
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How much debt you can comfortably handle
This builds a positive credit score over time.
2. Good Repayment Track Record
Paying your bills fully and punctually each month signals:
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Discipline
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Stability
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Low risk behaviour
This increases your chances of loan approval.
3. Low Utilisation Means Strong Financial Discipline
Banks like to see credit utilisation below 30% of your limit.
Example:
If your limit is $10,000, using under $3,000 regularly shows restraint and good debt management.
❌ Cons — How Credit Cards Can Hurt Your Home Loan Approval
Even though credit cards can be beneficial, they can also work against you if mismanaged.
1. High Outstanding Balances Increase TDSR
When your credit card bills are high, your:
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Total monthly debt payments increase
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Available headroom for a mortgage decreases
This can reduce your loan amount drastically.
2. Missed or Late Payments Hurt Your Credit Score
Even one or two late payments can signal:
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Poor financial discipline
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Higher lending risk
A low credit score can lead to:
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Higher interest rates
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Lower loan quantum
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Rejection from stricter banks
3. Large Credit Limits (Even If Unused) Can Raise Red Flags
Banks may factor in your potential debt exposure.
An excessively high limit can make lenders cautious.
Borrowers With No Credit Cards — Pros & Cons
What about people who avoid credit cards altogether?
While it may seem “safer”, the impact is not as straightforward as you think.
✔ Pros — Lower Debt Exposure
Borrowers without credit cards benefit from:
1. No Existing Debt → More TDSR Room
With no credit card repayments:
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More room is available to allocate toward your home loan instalment
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Higher chance of passing TDSR comfortably
2. No Risk of Late Payments or Overspending
This means:
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No negative marks on your credit report
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No chances of debt snowballing
❌ Cons — Why Having No Credit Card Can Be a Disadvantage
Here’s the surprising part:
Not having a credit card can actually be a disadvantage.
1. No Credit History = No Track Record
Banks cannot determine:
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Whether you’re a disciplined payer
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How you behave when managing debt
This creates uncertainty, which banks do not like.
2. Thin Credit Profile May Reduce Loan Approval Confidence
Some banks may perceive:
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Higher risk
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Insufficient financial behaviour data
This can lead to:
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More conservative loan offers
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Lower loan amounts
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Longer approval time
3. Lower Credit Score (Paradoxically)
Because credit scoring systems reward responsible repayment behaviour, having no credit activity can mean a lower or less established credit score.
So… Who Do Banks Actually Prefer?
Banks generally prefer borrowers who show responsible credit usage.
Preferred Borrower:
✔ Has at least one credit card
✔ Pays bills on time
✔ Keeps utilisation low (<30%)
✔ Has no missed payments
This type of borrower is more predictable and shows healthy financial habits.
Less Preferred Borrower:
✘ Has no credit history
✘ Has high outstanding debts
✘ Has frequent late payments
✘ Utilises most of their credit limit
✘ Recently increased credit limits before applying for a home loan
Best Strategies to Boost Your Home Loan Approval Chances
If you want to maximise your loan approval success, follow these strategies:
1. Maintain at least one credit card
This helps build a strong credit record over time.
2. Always pay your balances in full and on time
This is the most important factor — never miss a payment.
3. Keep credit utilisation below 30%
Low utilisation shows strong financial conduct.
4. Avoid increasing your credit limit before applying for a home loan
Banks will question sudden changes or large unused limits.
5. Clear any outstanding instalments where possible
Including:
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BNPL instalments
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Appliance loans
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Renovation loans
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Car loans
Reducing monthly debt obligations improves TDSR.
Should You Apply for a Credit Card Before Your Home Loan?
If you currently have no credit cards at all, it may be beneficial to start building a credit history at least 6–12 months before applying for a mortgage.
BUT — only if:
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You are confident you can manage it responsibly
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You keep utilisation low
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You never miss payments
A well-managed card can become a positive signal to banks.
Responsible Credit Behavior Can Make or Break Your Home Loan Approval
Whether you have credit cards or choose to avoid them, what truly matters is how your credit behaviour appears to the bank.
Banks Prefer Borrowers Who:
✔ Have a visible credit history
✔ Pay on time
✔ Maintain low utilisation
✔ Keep debt levels manageable
If you want the best chance of securing your desired home loan, start cultivating these habits early.
Need Help Assessing Your Credit Profile Before You Apply?
If you’re unsure how your credit cards, debts, or financial profile will affect your loan eligibility, I’m here to help.
Book a non-obligatory affordability assessment with me, Libin from Instyle Homes Singapore — and get clarity before you start your property journey. 😊
