As you prepare to buy a home, you’re probably also planning to purchase furniture or appliances. You might be thinking about opening a new credit card account, but you should wait until after you buy a house. Taking on a new line of credit can make it more difficult to get approved for a home loan.
How a New Credit Card Can Affect Your Credit Scores
If you open a new credit card account, your credit scores will most likely drop by several points. A credit card company will check your credit, which will result in a hard inquiry on your credit reports. Taking on a new credit card will also reduce the average age of your accounts. That can lower your credit scores.
How a New Credit Card Can Hurt Your Chances of Getting a Mortgage
Even a small dip in your credit scores can have a big impact on your ability to qualify for a mortgage. You might no longer meet a lender’s criteria, and your loan application might be rejected. If you do get approved, you can be charged a higher interest rate than someone with better credit. That can force you to pay thousands of extra dollars in interest over the life of the loan.
When you apply for a mortgage, a lender will scrutinize your finances to figure out if you can afford your monthly payments. Opening a new credit card account shortly before buying a house can raise serious concerns for a lender. The company can get theimpression that you’re struggling financially and question whether you would be able to repay a loan.
Taking on a new credit card and making large purchases can make matters even worse. That will increase your total amount of debt and debt-to-income ratio, which can put your mortgage application on shaky ground.
A lender will keep an eye on your finances throughout the mortgage application process. Even if you’ve been pre-approved, that doesn’t mean that you’re in the clear. A lender will review your finances again before giving final loan approval. If the lender discovers that you’ve gotten a new credit card, it might decide not to grant you a mortgage after all.
Wait to Open a New Credit Card Account
As you go through the home-buying process, your finances will be under scrutiny. Don’t make any changes that might interfere with your ability to purchase a home. If you want to get a new credit card, wait until after you’ve secured a mortgage and finalized yourhome purchase.
