Where paying off a credit card would be a bad thing

    Something that may strike a home buyer funny is the fact that paying off a credit card may cause damage to that home buyer’s credit profile.

    The act of paying off a credit card may cause the Buyer’s FICO score to be reduced and their “risk” to be increased.

    Look at it this way, when a Credit card is charged up to about 33% of its limit, it is giving most people the highest return to their credit score.

    If that credit card is paid off – then that buyer has more “credit available” to charge things.

    While that doesn’t seem to matter, nor make sense, to those of us who are looking at a credit card having an absolute limit – It’s either available or it’s not – It does matter to the credit bureaus.

    During the process of buying residential real estate, where the buyer has to secure a home loan, paying off a credit card during the buying process may harm the buyer’s credit score.

    This is how you’d know for sure. If you are a homebuyer in the process of buying a home and if you have been pre approved for a home loan, do not change any part of your credit profile.

    Don’t pay off a car. Don’t pay off any credit cards. Don’t change any credit card balances. Just keep your financial profile calm and don’t make any waves, no matter how small. Stay your course and make sure you reach out to your lender before changing anything at all.

    If you are going to pay off a credit card, or open up a new line of credit. Pick up the phone and contact your lender and make sure they give you their blessing.

    If they do give you the green light to go for it, follow up with them in an email to ensure they understood you correctly and you understood them.

    “Dear Brian,

    Thanks for taking the time to speak with me today regarding paying off my Chase Visa Card Balance of $3000.00.

    It was my understanding that my paying off the Chase Visa Card would not harm my credit and cause any issues with me buying the home.

    Please respond to me letting me know that I understood you correctly and that paying off the Chase Visa will not harm me regarding my home purchase.

    Thanks – Connor”

    That is the type of email you should send to verify what your lender said to you is gospel. Sometimes, not on purpose, the lender gives advice over the phone without seeing the entire picture.

    In this way, you are giving them a second chance to think about what they told you over the phone. Plus there is a large amount of accountability with asking for clarification or asking if you understood correctly. That is power my Brothers and Sisters.

    Please Reach out me, Connor with HONOR, when you are ready for me to represent you with your next, or first, real estate endeavor.

    I have an awesome real estate blog that has over 10000 articles related to Santa Clarita real estate and the best ways to buy and sell real estate in the Greater Los Angeles Areas.

    Santa Clarita Blog Real Estate

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    Paris and Connor MacIvor

    Connor and Paris MacIvor are in the Top 1% of Realtors Nationwide, starting their real estate business in 1998 with RE/MAX Gateway - Santa Clarita Valley and Valencia CA. Their becoming licensed real estate consultants and representatives came from the horrible experience they had when they bought their first home. There were many things that the agent they had hired did not explain and disclose, which per law he should have. Getting that agent on the phone after they closed escrow and after he had gotten paid was impossible. Paris and Connor called the broker, the board of realtors, the office manager and all they received was the promise of a phone call back. The remedy did come, but not as fast and in the way they wanted. That act - that bad agent was the reason why Paris and Connor became Realtors. That was all they needed to vow to never let the same fate befall anyone else, that befell them. Today Connor and Paris are focused on client service. Protection and top-shelf service with regard to their real estate clientele. They primarily work within the Santa Clarita Valley and Valencia CA. However, for a referral, where 80+ of their business is referrals they have License and Will Travel to other parts of Ventura County, Los Angeles County, and Orange County to handle real estate transactions for those who trust their real estate operation. Writing on their Real Estate Blog is a passion. SCVnest.com/blog is where you will find over 10,000 real estate articles. Go to SCVnest.com/radio to listen to their latest real estate radio broadcast.

    5 Responses to “Where paying off a credit card would be a bad thing”

    • Dave Gormley

      Written on

      Checking with the lender before making any change is the key. You would be surprised how often we see a settlement fall through or get delayed because of a financial change the lender was unaware of Connor. The communication you maintain with the buyer is a big part of why you don’t experience this. Sometimes it is even a positive thing, like a gift, or bonus. The lender wants to know where these funds came from.

      Reply
      • Connor MacIvor

        Written on

        That is why you are the expert in the lending world Dave Gormley, thanks for commenting. Some people would not think paying off a credit card of paying it down more than the usual payment would change anything…

        Reply
    • Marick

      Written on

      Thanks for the article Connor MacIvor. Very much useful information provided. When a bank offers a credit card, you should see that you would be a position to pay off the debts in future.

      Reply
      • Connor MacIvor

        Written on

        Very nice Marick, you are so right. So many never consider they will be able to pay them off once they start. Yet again, very few of the world’s population sets goals. – go figure! – thanks for commenting my friend.

        Reply

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