Do Not Close Out Credit Cards; Just Pay Them Down

We recently pulled credit for a borrower (a Realtor no less) who had closed out all of his credit cards as part of his effort to clean up his credit and live a debt-free lifestyle. He is now probably six months to a year away from buying a home b/c having no credit cards not only lowered his credit score but it prevents him from having enough “established trade lines” to qualify for competitive financing.

We remind borrowers time and again: Please do not close out credit cards, but pay them down to zero instead and keep the accounts open. This is much better for both qualification and credit score purposes.

Lenders like to see two to four “established” credit accounts (depending on loan program) on a credit report. Some lenders will, however, accept “alternative credit” (to be discussed in future blogs).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646