credit cards/mortgage?

Nini7385 · November 2012

Hi!!

My husband I were discussing our credit and how it will affect our chances of getting approved for a good mortgage. We both have car payments and student loans on top of two credit cards each. I say we pay off two of the cards then close one them (one is Best Buy and the other Sears), and pay off the other two then combine them (both Bank of America). He says that it's better to have all of the accounts still open and continue to pay them off as normal to show we can handle debt. I think that if we just have student loans and car payments and one credit card with both names on it to save money to be able to pay the mortgage and utilities and everything else that goes into buying a house.

What would you say is the best course to go?

mcskatcat · November 2012

Do you have balances on all the cards? The most important thing about revolving debt (i.e. credit cards) is the ratio of balance to total available credit. For that reason, it's generally recommended to keep lines of credit open because it lowers your overall ratio of debt to credit available.

Also, do you know your credit score? It will tell you fairly specifically what things are bringing your score down, which is something you should know before applying for a mortgage.

All that aside, how comfortably are you living? Houses are way more expensive than a monthly payment. We've probably put close to $30k into a $170k house in the last 2.5 years we've lived here. That's not everyone's experience, and this is considering we didn't have much come up on our home inspection. But you need to consider how you would fund a new roof or furnace, or what you will do if your basement floods. Houses are expensive, so you must have a decent chunk saved up for those purposes.

vpine · November 2012

I paid and closed 2 credit cards a few months before closing on house and it didn't affect use negatively, the most important thing is your credit scores and debt to income ratio - the debt to income ratios are calculated to see if potential borrower will be able to pay mortgage. The more monthly payments (car, personal loans, credit cards) you have, the less likely you will be able to afford a high mortgage payment - really depends on the house price and what you can afford. This is something you can discuss with a lender/mortgage broker in advance, they can give you suggestions on improving credit scores and can give you idea of how much you would qualify for.

Amberley18 · November 2012

You should pay off the cards and keep them open. That way your available credit remains high and your debt to income ratio is low.

Sisugal · November 2012

You do not need to carry a balance to show responsible cc use. You need to keep borrowing to a low % of allowable limits (think under 20%) and PAY THEM OFF! Do nt close them. If having the cards tempts you to use them, then either cut them up,place themn in a dresser drawer or freeze in a block of ice for emergency use only.

ladymiche · November 2012

You should check your credit score first before you decide to do a mortgage. If closing your other CC's will make your credit score go down then it's not advisable to do it. Mortgage is a big responsibility, think a lot of times first before getting one. Goodluck.

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http://www.loans-portal.com/how-to-get-a-mortgage/

toothpastechica · November 2012

Amberley18:
You should pay off the cards and keep them open. That way your available credit remains high and your debt to income ratio is low.

This. Pay them off, but don't close them, not only does it help with the "credit ratios' as mentioned, but it helps to make you look responsible that you are able to have access to credit and NOT spend it. The fastest way to get better credit is to use credit cards but pay them to 0 every month so you don't pay intrest and the bank knows they can trust you and are willing to lend you more money(increase limits/lines of credit/morgage/loans) if you ever need it down the road.

credit cards/mortgage?

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