My partner and I are in the process of tidying up our finances in the hopes of getting a home loan in a year or 2. We have managed to cut out a huge chunk of debt and all we have left are 2 credit cards (1 each). Both cards together have 6k credit between them (only owe 2k). Should we keep them, merge them or get rid of them all together? Personally I'm leaning more towards merging them so we are only paying interest on one account rather then 2. I'd love to get rid of them, but want a 'backup' in case of an emergency. What looks / works out better when applying for a home loan. I'm getting mixed responses from google... some say to get rid of others say they are great to maintain a solid credit score.
Please what have your banks/ providers told you to do with credit cards in the process of applying for a home loan?
Financial advice plz - credit cards to keep or to close
Financial advice plz - credit cards to keep or to close
Posted in:
Money
5 Replies
Keep them as back up until you’re ready to apply for a loan, then get rid of them.
The reason being the whole amount available is seen as a liability, even if the balance owing is zero.
So for now, they’re fine.
The bank sees a 6k credit card as 6k debt because you have access to 6k. It just depends if that affects your financial situation enough to get your application rejected.
I suggest seeing a broker if you have complex financials. They can advise you how to best organise your finances to be successful. It's about more than credit cards.
We got rid of our CC a while ago & switched to debit & make sure we have enough money for emergencies. It's much easier to manage our spending & no extra unexpected debt.
Maybe if you wanna keep them drop the limits to $1500 each so that’s $3000 between you both instead of $6,000. My theory is that if an emergency arises that’s going to cost more than $6000 it’s probably an emergency that would be better suited to a small personal loan and not on credit card :)
When we applied for our home loan my partner needed to get rid of his and it was suggested I decrease my limit from 5k to $1500. Paid his out and cancelled it, decreased mine as suggested and no problems.
A few years later I increased my limit back up to 5k, I just had to satisfy the bank that I could service the increased limit and I'd had a pay increase so no dramas to do so.
Pay them off. Save up $6k cash and put it in an emergency fund away from your house deposit. Then close the cards. Then you have money to access in case of emergency. As previous posters have stated, even if paid off, the open card is considered a liability.