Buckling under the weight of such debts, many people have a hard time qualifying for a mortgage, notes a Utah home loan expert Altius Mortgage Group. Carrying too much debt on your credit card lowers your credit score, which in turn also lowers your chances of qualifying for a mortgage.
Other than reducing the amount of debt on your credit cards, you need to avoid making these mistakes.
Churning credit cards
If you’re not familiar with the practice, it is the act of signing up for a series of credit cards in the pursuit of sign-up bonuses. Credit card companies often entice people to sign up with them by offering freebies, such as discounts and flier miles.
Some people tend to go after these miles with relentless zeal. They open as many credit cards as possible and cancel them as soon as they get the rewards.
While churning credit cards might cut down on travel expenses, it raises a red flag to the mortgage lenders. Too many canceled cards in your history cast doubts on your creditworthiness. As such, lenders tend to be skittish when dealing with such borrowers. It could lead them to deny your application.
Paying the minimum balances
Ideally, you should pay any money that you charge to your card within the stipulated time frame, usually between 25–30 days. Failure to do so attracts an interest rate on the balance until the balance is paid in full.
Making minimum payments lets you avoid late fees and other charges, but it doesn’t help you pay off the debt. As a result, the interest on the credit card keeps piling. In the end, you will end up owning more money than you initially spent on the card and your credit score takes a hit.
While credit cards are indeed convenient, you must be very careful when using them. One misstep could set you down the road towards massive debt and financial ruin.