Buying a house is likely one of the biggest financial decisions you’ll ever make. It requires careful planning and consideration of how your finances may impact your ability to get a mortgage. One key thing to think about is how applying for new credit cards in the months leading up to a home purchase could affect your credit and loan application. In this comprehensive guide, we’ll look at whether you should get new credit cards 6 months before buying a house.
The Potential Impact of New Credit Cards on Mortgage Applications
When applying for a mortgage lenders will scrutinize your credit history credit score, debt-to-income ratio, and finances. This helps them determine if you can manage mortgage payments. Any changes to your credit, like opening new cards, may affect your application.
Hard Credit Inquiries and Credit Score
A worry about getting new credit cards before getting a mortgage is how hard inquiries can hurt your credit score. When you apply for credit, the lender does a hard inquiry, which can lower your score by a few points for a short time.
While one inquiry may not drastically affect your score multiple in a short time can accumulate and take a bigger toll. Too many new account inquiries in the months before applying for a mortgage may be problematic.
Reduced Average Age of Credit
Another factor is how new cards can reduce your average age of credit history. Lenders prefer a longer history, as it shows you can manage credit responsibly over time.
Opening a new card lowers your average account age, which can negatively impact your score. Newer accounts don’t hold as much weight in credit scoring models.
Increased Credit Utilization Ratio
Getting new cards can also influence your credit utilization ratio – the amount of credit you’re using versus your total available credit. Lenders like to see this below 30%.
Your utilization ratio may go up if you get more cards but don’t pay off your old ones. This can hurt your credit score and mortgage chances.
Potential Benefits of New Credit Before a Home Purchase
While risks exist, some situations may warrant opening new credit cards before buying a home.
Improved Credit Utilization Ratio
If you pay off your balances and don’t use your cards much, getting new cards can actually help lower your ratio. You may be able to get a mortgage if your credit score goes up.
Building Credit History and Mix
Opening new accounts can show that you can responsibly handle different types of credit over time. Mortgage lenders like to see this mix of credit types and a long credit history.
Increased Credit Limits and Available Credit
Higher total credit limits and available credit make you appear less risky to lenders. More available credit that you aren’t tapping makes it seem you can handle taking on mortgage debt.
Timing Considerations for New Credit Before a Home Purchase
Carefully weigh when you apply for new credit around a home purchase.
The 6 Month Rule
Many advise caution applying for new credit in the 6 months before a mortgage application. Inquiries and reduced average account age during this critical period may hurt your credit score.
However, your specific situation may warrant exceptions to this guideline. Evaluate your credit profile and goals.
The 12+ Month Approach
If you plan to buy soon, opening new cards 12+ months out may be better. It allows time for accounts to age and your credit usage to stabilize before applying for a mortgage.
This longer-term view can help you benefit from the positive effects of more available credit and mix. Just be sure to manage new cards responsibly.
Waiting Until After
You may opt to wait until after closing on the home to open new cards. This avoids any complications new accounts could cause during the mortgage application process.
While this approach misses potential benefits of new credit, it eliminates risks to your approval odds. You can always open new accounts after securing your home loan.
Key Factors to Consider When Deciding on Timing
Consider your unique situation when weighing the timing of new credit accounts before a home purchase:
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Current credit profile – Evaluate your score, history length, and utilization ratio. How could new accounts change this?
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Mortgage timeline – Know when you plan to apply and buy. Factor this into new credit timing.
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Financial situation – Assess income, savings, debts. Do potential rewards of new cards outweigh risks?
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Responsible credit management – If you tend to overspend or miss payments, waiting may be safer.
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Lender requirements – Discuss your situation with lenders to ensure you follow their specific guidelines.
Case Studies and Examples
Here are some examples of how new credit cards before a mortgage can play out:
Responsible Use Helps Credit Profile
Sarah has good credit. She opens two new cards 12 months before applying for a mortgage. Her credit score increases by 20 points, helping her get a lower interest rate and savings.
Aggressive Credit Hurts Mortgage Chances
John has limited credit history. He opens 3 new cards in the 3 months before applying for a mortgage. His score drops 40 points. He gets a less favorable mortgage rate due to the inquiries and high usage.
Waiting Helps Avoid Complications
Emily has good credit and plans to buy in 9 months. She waits to open new cards until after closing. This avoids any credit score impacts that could affect her application. She gets a favorable mortgage rate.
The Bottom Line
Opening new credit cards 6 months before buying a house may or may not be advisable depending on your situation. Carefully weigh the potential risks and rewards. Manage new accounts responsibly, and align timing appropriately with your homebuying goals to make the best decision. With proper planning, new credit can help rather than hurt your mortgage chances.
It’s not only credit cards
It’s not only a new credit card that should be held off about six months before a mortgage. Any loan, for example an auto loan or car lease, will also have an affect on your credit score. So if you’re under contract and you need to close shortly, always consult with your mortgage broker before you apply for a new credit card, take out a new lease, or apply for any new loan (this is besides the point that new debt can impact your income/debt ratio and cause you to unqualify for the loan). Frequently asked questionsI recently moved. Should I use my old address or new address when applying for a credit card?I recommend using the old address for the first approx. 30 days after the move as it can take up to 30 days for the new address to show on your credit report
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Highest ever!! Earn $2,000 after spending $30,000 within the first 3 months. Plus, earn an additional $2,000 for every $500,000 you spend during the first year. You can earn the bonus unlimited times over the course of the first year!
Earn 150,000 points after spending $20,000 within the first 3 months. Plus earn an additional $500 statement credit after spending $2,500 on qualifying flights booked directly with airlines or through American Express Travel within the first 3 months. Expires 6/30/25.
Earn $500 after spending $500 within the first 45 days.
The smarter way of keeping track of your cardsNow available on Android and iOS
Get our app on
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Buying A Home In 6 MONTHS? Here’s Your Gameplan
FAQ
How long after opening a new credit card can I get a mortgage?
Give yourself at least a month from opening a new card and applying for a mortgage. Chase reports new accounts on the first statement post. As long as the account is on your credit report before the initial mortgage application, your credit report won’t change during closing so you’ll be fine.
Should you get a new credit card when buying a house?
Exciting new things are on your horizon when you begin your home buying process. You may have begun to look at homes and talk to a mortgage loan officer about how much of a home you can afford. It may be tempting to embrace the excitement by also applying for a new credit card with better rewards or a big promo.
Should I get a new credit card before a mortgage application?
Making your monthly payments on time will raise your score eventually, but this can take a few billing cycles or longer. Overall, opening a new credit card account and managing it wisely is good—not bad—for your credit. But getting a new card just before or during the mortgage application process isn’t the best timing.
How long should I wait before applying for a mortgage?
I wouldn’t recommend applying for any credit card 6 months before applying for a mortgage. Ideally wait a year just to be safe. A few SUB aren’t worth missing out/delaying on the home you want Give yourself at least a month from opening a new card and applying for a mortgage. Chase reports new accounts on the first statement post.
Should I apply for new credit cards after closing my home loan?
Even if you have already received pre-approval, avoid applying for new credit cards until after closing your home loan. Every time someone checks your credit, it “dings” for a while. Also, getting new credit lines can hurt your credit further.
Should I open a new credit card account when getting a mortgage?
Opening a new credit card account when you’re trying to get a mortgage can complicate your loan application. A new account may cause your credit score to dip temporarily and may raise questions about the stability of your finances. If you’re considering a new card and a new home at the same time, hit the pause button and read on.
How long before buying a house can I get a credit card?
The 12+ Month Approach: If you’re planning to buy a home in the near future, a better approach may be to open any new credit cards at least 12 months before your anticipated mortgage application.
Can I apply for a credit card before getting a mortgage?
Many mortgage loan officers still recommend that you avoid opening any new loans or credit cards. The lock period is only good for your prequalified loan amount and property type.
How long should you have a credit card before applying for a mortgage?
Don’t apply for credit six months before you apply for a mortgage. If you do, a search will be done on your file for a loan, credit card, utility contract, or even a cell phone.
Can I get a credit card before closing on a house?
It depends on where you are with your scores and in the process. It could have little to no effect or a big one. Your best bet is to wait till after you get your keys. Credit card applications are immediate as you can do it same day and your mortgage will take around 30 days or more to hit your report.