Mortgages | Car Loans | Personal Loans | Debt Consolidation | Credit Reports | Credit Cards

Home Purchases

Home Purchase Advice
-Home Purchase Guide
-Ensuring a Fast Purchase
-Pre-Application Preparation
-Buy, Don't Rent!
-Spouse Have Bad Credit?
-Effects of Credit Card Debit
-Student Home Loans
-Mortgage Mistakes
-Fair Market Value
-Buyer's Market or Seller's?
-Pre-Offer Question to Ask
-Making an Offer
-Putting No Money Down
-Home Inspections
-Home Warranties
-Escrow Accounts

Home Construction Info
Buying a Vacation Home

Home Equity Loans

Auto Loans
Personal Loans
Debt Consolidation
Credit Reports
Credit Cards

 -Managing Money
 -Credit Help
 -Checking Accounts


If you are considering applying for a mortgage, you may want to consider eliminating credit card debt. Not having a balance on your credit cards will increase your changes of getting a good rate on your home loan.

Dear Star Loan Services,
My husband and I are currently utilizing one credit card with 0% interest for paying our day-to-day purchases, to avoid having to constantly balance our checkbook. Before using a credit card in this manner, we would only charge around $300-500/month on our other cards, and pay the balance in full every month.


Now, we typically charge around $3000/month to it. We make one payment each month from our checking account. We are running a $1,500 to $2,000 balance and can pay the card in full at any time without difficulty.

We are in the market to buy a new home and are speculating whether we should pay off the balance prior to communicating with a lender. Being that we use this card on a regular basis, does it appear as though we always have an outstanding balance based on its payment history? Is it possible for this to effect us negatively?

Would it be a good idea to begin using only a checking account instead, and have a zero balance on the card?

Wendy Strahls

Dear Wendy,
When people write in with this question, they’ve got a decent sized balance in their checking account, but are paying anywhere from 4 to 30 percent interest on their credit card debt.

It is obvious that you have good credit. You have been offered a credit card with zero percent interest on it, so you are paying for your purchases over time and carrying a small balance on the account. Also, you have money in your checking account that is likely earning some interest every month.

Earning the interest sort-of puts you ahead financially, but carrying a balance can damage your credit score and history. It is very common for credit card companies to report your balance as if your limit has been maxed out.


A good idea would be to obtain a 3-in-1 credit report to see how the bureaus are reporting your credit card activity and balances.

Lenders are familiar with seeing credit card balances, and they will adjust for them. Lenders will add up how much you can afford to spend each month on your mortgage, including interest and taxes. Conventional loan lenders allow you to spend up to 30% percent of your gross monthly income on these three items and up to 36%on your total debt.

If you are carrying a balance on your credit card, the lender will subtract your minimum monthly payments from the sum of the debt that you carry. The end result will be you qualifying for a smaller mortgage loan.

In your situation, the lender will probably see that you have enough money to pay your debt off, but 'dock' you for the way you manage your finances.

It seems as though you are only talking about a thousand dollars or so. If this is the case, you should pay off your credit card debt and keep the slate clean.

No matter what the situation is, paying off your debts in full will result in a higher credit score. Carrying any sort of balance, even at zero percent, will only hurt you.

Related Info:
Importance of Paying Credit Card Balances in Full
Your Credit and Mortgages
Making Late Payments


Home | Apply NowCommon Questions | Mortgage Loan Types | Contact Us
Mortgage Fees | Mortgage Information

Home Construction Info | Vacation Home Buying Tips | Home Purchase Advice

Home Purchases | Refinancing | Home Equity Loans

© 1998 Star Loan Services Inc.. All Rights Reserved. Privacy