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Paying Off Credit Cards |
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Dear Edith, We plan to pay off our credit card debt before we apply for a mortgage. After that, is it better to have credit cards with a lot of open credit or to cancel the cards once they have been paid? I have heard both theories, that you are a better credit risk if you have few accounts, or if you have paid them off but have a high credit limit. |
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You’ve heard both theories because the advice on this has changed. Years ago, lenders considered you a poor risk if you had the ability to run up lots of debt in the future. We used to advise not only paying down your cards, but officially canceling all but one or two before a mortgage application. These days, though, the new credit scores give you extra points if your existing debt is low compared to the amount you could be borrowing. For that calculation, lots of untapped credit helps your score |
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Edith
Originally published on October 30, 2005 |
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