Will a mortgage broker take into consideration low interest credit cards if your credit score is low?(eg. 650)

Question

I have $10,000 sitting on a 5% American Express card. That 5% is for life. It seems to be dragging down my credit score.

Answer 1

The credit bureau's don't know the rate on the cards, nor do they care. The care about made or missed payments. They care about how many accounts you have and how long you have had them. And they care about the percentage of your debt compared to the total you have available to borrow.

Try to request a balance increase from your Am Ex account. This will raise your available balance. On some credit reports, Am Ex shows up as if you owe the full balance every month. This makes your debts look way worse than they really are. A card statement would correct this error.

Answer 2

Most of the other advice here is good, but I will add a few points.
As it has been stated, your credit card interest rate is meaningless in terms of mortgage qualification. Idealy, you do not want any one credit card account balance to be over 30-35%. The closer you get to your limit, the more "red flags" go up.
As someone else said, try to request a higher limit, pay the balance down, or try to transfer some of the balance.

Mortgage qualification essentially consists of three things: your credit score/history, income (especially the DTI ratio), and the property LTV (loan to value ratio).

You may want to a look at my website, it is NOT a sales site, and has alot of good info. This is a direct link to the section that explains mortgage qualification: http://www.mortgagemystery.com/mortgage-qualification.html

Your credit score is actually not that low. You are in the A paper or Alt-A paper mortgage category, meaning you will qualify for mortgage programs that offer good rates.

Answer 3

The rate some credit card company will give you has ZERO bearing on your ability to finance a home. NONE.

My best guess is you owe $10,000 on a card that probably has a limit right near $10,000?

Maxing out a single credit card WILL lower your score. That's one benefit of banks getting you to transfer balances over to them. Your score drops, and you're stuck with them. Miss one payment by one day and that 5% turns into 25% overnight! And you can't switch again because your scores won't get you a good card to replace it with.

If you have other cards, it's possible that spreading out your balance over 2-4 other cards would help. As long as no single card balance exceeds 50% of it's available limit, it might help. But having too many cards with balances can be a negative as well, though probably not as bad as one completely maxed out card.

If you have any cash, pay it down or pay it off. You're better off doing that than putting a down payment down with those scores, and using the down payment to pay off that debt instead.

Answer 4

Low-interest cc's won't matter to a broker if they are being paid. A 650 score is good enough to not worry about that card.

Answer 5

Not sure

Answer 6

Thanks everyone for the answers!