You did WHAT!? Part 2 – Credit Cards
- Don’t Apply For New Credit Cards
- Too many credit inquiries over a relatively short period of time are never a good thing for your credit score. Even if you have excellent credit, resist applying for ANY type of credit card 3-6 months before applying for a mortgage – and during the lending process of course. Not only does the inquiry potentialy “ding” your credit for a while, but should you be approved, you need to know that the mortgage lender will actually view any unused lines of credit more similar to unsecured “loans.” Also, be careful to avoid those tempting and seemingly benign offers at the checkout counter at your favorite department store. Sure… you’d like to “save 10% today by applying” for that department store credit card. Opening any new credit cards without consulting with me first could turn out to be a big mistake!
- Don’t Close Major Credit Card Accounts
- Logic would indicate that if having lines of credit may be considered a “bad” thing, it would therefore be smart to close accounts that may not be needed or used. I could write an entire article just about this subject but to keep things simple… when you close any credit card, you may easily, yet innocently raise your “debt to credit limit ratio”. This could an disqualify your mortgage approval and best possible mortgage rate. When you close an account, you are obviously reducing your available credit however, if you have balances, your percentage of credit “utilization” is going to increase. This could be bad from a lender’s perspective.
ALWAYS keep your older accounts open, and possibly even use them on occasion. Closing major credit card accounts is almost always a BIG mistake!
Again, if you are unsure of how a decision may affect your ablility to move forward with mortgage financing, just ask! That’s what I’m here for!