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Blog by Philip Jones

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How Credit Cards Can Affect Your Loan



 Most people know that a spotty credit history can disqualify you for a home loan. Making monthly payments on credit cards charged up to the limit can do the same thing.  But what most people don't know is that merely having a large number of credit cards, even with low balances and a history of timely payments, can disqualify you for a home mortgage loan just as quickly. 

     According to mortgage home lenders, having a number of credit cards can be just as detrimental to the granting of further credit as a history of late payments.  Lenders look at it this way:  If you have ten credit cards, each with a limit of $5,000, that means you have the potential to run up $50,000 in debt virtually any time you choose.  That mere possibility makes you a greater risk, from their point of view. Another caution is charging high dollar amounts after you have been approved for a loan. A desire to charge new furnishings can take you out of the qualifying loan amount you thought you had if the mortgage company decides to pull your credit history again just before the closing.  

      If you are planning to apply for a home loan in the future, keep only those credit cards you actually need to use and cancel the others, and don't purchase items between pre-approval and closing that might disrupt your financing.