Mortgage  Question?
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How Many Credit Cards Should You Have for a Mortgage?

How many credit cards should you have when you apply for a mortgage? Can a lender ask you to close an account if you have too many credit cards?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

In short, there is no single answer to your question.  When you apply for a mortgage, lenders focus on your credit score and debt-to-income ratio as opposed to the specific number of credit card accounts you have -- although they are certainly related.

If you have a low credit score partially because you have too many credit cards, loans or other debt, then it may be a good idea to close some of your accounts before you apply for a mortgage.  Lowering your credit utilization, debt balance or monthly loan payments can all positively impact your credit score and debt-to-income ratio.  A higher score may enable you to qualify for better loan terms, including a lower mortgage rate, while reducing your debt expense increases the loan you can afford.

So if your credit score is too low or your debt-to-income ratio is too high, the lender may ask you to close one or more of your credit card accounts.  The number of accounts the lenders requests you to close depends on how many accounts you have open and your monthly payments.

Although there is no magic number, having two-to-three credit card accounts is usually a good number but it depends on the balances, monthly payments and terms for your accounts.  If you have more than three credit cards, lenders may be concerned that you have access to too much credit or that your monthly debt burden may make it challenging for you to afford your mortgage payment.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income and debt payments

In an ideal scenario, if required, you should close your accounts several months before you apply for the mortgage so you can potentially benefit from a higher credit score.  Additionally, it can take some time for your credit report to reflect account changes.

If your score is already high and you can qualify for the mortgage you want, then the number of credit card accounts you have is less of a concern.  In this case, you likely do not need to close any of your accounts before you apply for the loan.

You can still benefit from paying off or down your credit cards or other loans -- because you reduce your monthly debt expense -- but you can keep the accounts open with a zero balance.  As long as you pay your accounts on time and have a low overall debt balance, you should be in a great position to get approved for a mortgage.  Simply put, the lower your monthly debt expense, the higher the loan amount you qualify for.

To summarize, while the number of credit cards accounts you have may indirectly impact your ability to qualify for a mortgage, lenders primarily evaluate your credit score and debt-to-income ratio to determine the loan you can afford.  That said, closing an account and reducing your monthly debt expense may help you get approved for a mortgage, regardless of if the lenders requests it.  We advise you review you current credit score and monthly debt payments to determine the approach that is right for you.

The table below shows mortgage terms for leading lenders in your area.  We recommend that you contact multiple lenders to confirm their qualification guidelines, especially as it relates to your credit profile.  Shopping lenders is also the best way to save money on your mortgage.   

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Current Mortgage Rates in Ashburn, Virginia as of December 2, 2020
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Data provided by Brown Bag Marketing, Inc. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more on rates and product details.

Sources

"B3-5.3-01, Number and Age of Accounts."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, April 1 2009.  Web.

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About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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