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.
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.