Mortgage  Question?
How Many Credit Cards Should You Have Qualify 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, your credit score and debt-to-income ratio are more important than the specific number of credit card accounts you have -- although they are related.  If you have a low credit score and too many credit card or other loan accounts, then it may be a good idea to close some of your accounts before you apply for a mortgage.  In an ideal scenario, you would close your accounts several months before you apply so you can potentially benefit from a higher credit score.  Additionally, it can take some for changes in your credit profile to appear on your credit report.  If you have a good credit score, then you do not need to close any of your credit card accounts before you apply for the loan and closing any accounts may not be in your best interest because it can negatively impact your credit score.

The number of credit card accounts you have, as well as other loans, can impact your credit score but if your score is already high then the number of accounts you have open is less of a concern. While two credit cards is usually a good number of accounts, the difference between two and three accounts is marginal. As long as you pay your accounts on time, have a low overall debt balance and a high credit score then you should be in a great position to get approved for a mortgage. If your score is already good, then there is a small chance that the mortgage lender may ask you to close one of the accounts to reduce your borrowing capacity but this would not negatively impact your loan application.

In addition to your credit score, lenders also focus on your total monthly debt payments and use this figure to calculate your debt-to-income ratio. If you have high monthly debt payments due to credit cards or other loan accounts then this impacts your debt-to-income ratio and reduces the mortgage amount you can afford. If you keep your credit card account balances relatively low and pay them off monthly then you should not have an issue when you apply for the loan.

In addition to reviewing your credit card and loan balances at the time you apply for the loan, lenders also look at trended credit data, which shows your account balances and monthly payments over the past twenty-four months.  The trended data show if you make the minimum payment or pay off your account monthly.  While paying off your credit card account is better than maintaining a balance, your trended credit data may still impact your debt-to-income ratio.

Even if you pay off your credit card balance every month, if you maintain high average balances then the lender may include your monthly credit card payments as debt when you apply for the loan.  This may be the case even if you have no monthly payment due because your account is paid in full.  So even if your current account balance shows zero, the lender may use your trended or average monthly credit card payments to calculate your debt-to-income ratio.  The higher your monthly debt payments, the lower the mortgage amount you qualify for.  If you maintain low-to-moderate credit card balances then the trended credit data is less of an issue when you apply for a mortgage  

We always recommend that you contact multiple lenders to understand how they would handle your personal situation. We advise you to contact at least five lenders as qualification guidelines vary.

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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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