I just asked my mortgage broker about the effect of credit cards on finance. She said that banks will consider the maximum possible monthly repayments that you might have on your card when doing the application. Eg if you have a $5000 limit, they will assume you have maxed out your card to pay gambling debts and are paying off around $250 each month.
Luckily I am able to fight stupidity with stupidity and have reduced my limit, thereby reducing my monthly expenses.
I guess what they are really testing is if you CAN reduce your limit .. if you can't reduce the limit when they ask, that means you are in financial trouble.