You probably don’t need another excuse to use your credit card, but keeping three lines of credit open and active is often a requirement by many mortgage lenders as a basic qualifying guideline. The requirement usually calls for a minimum 24-month history on three trade lines that are currently open.
Many banks and lenders assess potential borrowers’ credit profiles, focusing largely on credit score, but also on credit history. While a high great credit score is favorable, it’s what’s behind that credit score that’s really important. A consumer may have credit scores in the 700s, but if they have limited credit history, a bank or lender may still deny financing if they feel the borrower hasn’t shown a history of supporting large amounts of debt for a considerable amount of time.
After all, a three-digit number doesn’t always give you the complete picture. A borrower with one active credit card with a $1,500 limit that is paid on time each month for two years will likely have a reasonably high credit score, quite possibly in the 700s, but why would a bank or lender provide financing on a $500,000 mortgage to a consumer who has only used a $1,500 credit card to prove their debt worthiness?
Even if the borrower has three credit cards with $5,000 balances, if all are recently opened, the bank or lender will have a tough time determining the dependability of the borrower over the long term - yet another reason why financing will often be denied. That’s why it’s important to open credit lines, and keep them open and active, while periodically raising credit limits to increase the total amount of debt you can support and simultaneously increasing your available credit percentage.
Don’t even think about closing credit card accounts or other lines of credit that you’ve had open for a number of years, as you’ll simply throw away positive credit history and increase your chances of being denied when you finally find the home of your dreams.