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How Many Credit Cards Should You Have for a Mortgage?
Michael Jensen, Mortgage and Finance Guru
Updated October 20, 2020
In short, there is no single answer to your question. When you apply for a mortgage, lenders focus on your credit score and debt-to-income ratio as opposed to the specific number of credit card accounts you have -- although they are certainly related.
If you have a low credit score partially because you have too many credit cards, loans or other debt, then it may be a good idea to close some of your accounts before you apply for a mortgage. Lowering your credit utilization, debt balance or monthly loan payments can all positively impact your credit score and debt-to-income ratio. A higher score may enable you to qualify for better loan terms, including a lower mortgage rate, while reducing your debt expense increases the loan you can afford.
So if your credit score is too low or your debt-to-income ratio is too high, the lender may ask you to close one or more of your credit card accounts. The number of accounts the lenders requests you to close depends on how many accounts you have open and your monthly payments.
Although there is no magic number, having two-to-three credit card accounts is usually a good number but it depends on the balances, monthly payments and terms for your accounts. If you have more than three credit cards, lenders may be concerned that you have access to too much credit or that your monthly debt burden may make it challenging for you to afford your mortgage payment.
Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income and debt payments
In an ideal scenario, if required, you should close your accounts several months before you apply for the mortgage so you can potentially benefit from a higher credit score. Additionally, it can take some time for your credit report to reflect account changes.
If your score is already high and you can qualify for the mortgage you want, then the number of credit card accounts you have is less of a concern. In this case, you likely do not need to close any of your accounts before you apply for the loan.
You can still benefit from paying off or down your credit cards or other loans -- because you reduce your monthly debt expense -- but you can keep the accounts open with a zero balance. As long as you pay your accounts on time and have a low overall debt balance, you should be in a great position to get approved for a mortgage. Simply put, the lower your monthly debt expense, the higher the loan amount you qualify for.
To summarize, while the number of credit cards accounts you have may indirectly impact your ability to qualify for a mortgage, lenders primarily evaluate your credit score and debt-to-income ratio to determine the loan you can afford. That said, closing an account and reducing your monthly debt expense may help you get approved for a mortgage, regardless of if the lenders requests it. We advise you review you current credit score and monthly debt payments to determine the approach that is right for you.
The table below shows mortgage terms for leading lenders in your area. We recommend that you contact multiple lenders to confirm their qualification guidelines, especially as it relates to your credit profile. Shopping lenders is also the best way to save money on your mortgage.
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Current Mortgage Rates in Slough, England as of March 11, 2024
Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes or insurance premiums. Actual payments will be greater with taxes and insurance included. Read through our lender table disclaimer for more information on rates and product details.
Sources
"B3-5.3-01, Number and Age of Accounts." Selling Guide: Fannie Mae Single Family. Fannie Mae, April 1 2009. Web.
About the authorMichael Jensen, Mortgage and Finance Guru
Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael
FAQs
Once you have a credit score, you shouldn't have a problem getting a normal credit card. Again, you'll want to have 3 open and active tradelines when applying for a mortgage.
Is 7 credit cards too many? ›
How many credit cards is too many or too few? Credit scoring formulas don't punish you for having too many credit accounts, but you can have too few. Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.
Does having multiple credit cards affect mortgage? ›
Another potential downside of having a large number of cards is that it can make you look risky to lenders and lower your credit score. Even if you have them all paid off, the mere fact that you have a lot of open and available credit lines can make you look like a potential liability to the next lender.
Is it better to have 3 or 4 credit cards? ›
If your goal is to get or maintain a good credit score, two to three credit card accounts, in addition to other types of credit, are generally recommended. This combination may help you improve your credit mix.
How much credit card debt is OK for a mortgage? ›
There is no set amount that lenders will consider too much credit card debt for you to have. They will instead look at your debt to income ratio to be sure that you will be able to comfortable afford both your repayments of your debts and your mortgage.
Is it too much to have 4 credit cards? ›
There is no right number of credit cards — it depends on how many you can manage. Having multiple credit cards helps reduce your utilization rate and provides lenders with more information to better gauge your creditworthiness.
What is the 5 24 rule for Chase? ›
Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.
Is it OK to have 10 credit cards? ›
While it is not inherently bad to carry multiple cards, cardholders need to know what their own limitations are and what they can handle. It can be difficult to manage payments for multiple credit cards at once.
Is 20 credit cards too much? ›
At The Points Guy, top executives and their households can have over 20 credit cards offering flight, airport, hotel and cash rewards. And they know how to use them. Few Americans would need that many cards, but many financially responsible people are leaving money on the table.
How much credit card debt is too much for a mortgage loan? ›
You typically need to stay below 28 percent to be approved. The back-end ratio takes your total debt payment into consideration, including your credit card payment. You should aim to stay below 36 percent.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
How many credit cards does the average American have? ›
How many credit cards does the average person have? According to the latest figures from Experian, the average American has 3.84 credit cards with an average credit limit of $30,365.
What is the 2 3 4 rule for credit cards? ›
2/3/4 Rule
You can be approved for up to two new credit cards every rolling two-month period. You can be approved for up to three new credit cards every rolling 12-month period. You can be approved for up to four new credit cards every rolling 24-month period.
How many credit cards should I have to get an 850? ›
If you're going after the 850 (again, a perfect score doesn't matter), then you'll want to get 21 credit cards as soon as possible and wait.
Does cancelling a credit card hurt your credit? ›
Key takeaways: Closing a credit card can hurt your scores because it lowers your available credit and can lead to a higher credit utilization, meaning the gap between your spending and the amount of credit you can borrow narrows. Canceling a card can also decrease the average age of your accounts.
Do I need multiple credit cards to buy a house? ›
Most Americans have two credit cards or fewer, but 13% of us have four or more. If you have a lot of credit card accounts but aren't carrying debt and not having trouble managing your accounts, this likely won't hurt your odds of getting approved for a mortgage.
How much credit do I need to get a mortgage? ›
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
How much credit card debt is too much for a home loan? ›
You typically need to stay below 28 percent to be approved. The back-end ratio takes your total debt payment into consideration, including your credit card payment. You should aim to stay below 36 percent.
Can you buy a house with one credit card? ›
It's possible to buy a house with a credit card, but it's an unconventional approach to short-term funding for such a large purchase. It's also not done primarily because the limits on credit cards are usually too low to cover a home purchase.
