How Can Inactive Credit Affect Your Mortgage?

How Can Inactive Credit Affect Your Mortgage?

Your credit report tells so much about you.  It basically tells what kind of person you are.  If your credit report shows a history of on-time payments, low credit card balances, and a good mixture of credit types, it shows lenders how responsible you are with your money.  On the other hand, your credit report can tell them a completely different story.  A short credit report, high credit card balances, late payments, etc tell lenders what kind of a financial mess you are.

You don’t want lenders thinking that you are anything but completely responsible and on the ball.  The best way to do this is by having a long, strong credit report.  It is important to understand what affects your credit report so your credit report can be strong and your credit score can be high.  Credit scores are directly affected by credit reports.  The weaker your credit report, the lower your credit score and vice versa.  Make sure that you have a good variety of credit accounts.  Make your payments on time or early.  Have a low income to debt ratio.  These are easy ways that you can make your credit report better.

If you are considering buying your dream home, or any home/condo for that matter, you need to make sure that your credit report is in check first.  Check your credit report with all three credit bureaus before sending in that mortgage application.  The three credit bureaus contain different information, so you’ll want to make sure you are good to go with all three.

Could your credit report be a little stronger?  Is your credit report holding you back from qualifying for the rate you want?  Your inactive credit accounts may be to blame.  If you haven’t been using certain accounts, the lender might wonder how good you really are at managing your debt.  It is better to have one or two credit cards that you use often, even if they have a balance, than it is to have several cards with several balances that haven’t been used in years.  Remember, it is better to have a few credit accounts that are used often.  Your goal shouldn’t be to get as many open accounts as possible.  This is also a warning flag to lenders.  They wonder what will happen to all of these open accounts if you come across financial trouble.