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Applying for a mortgage? Here's why you shouldn't get a new credit card - Benchmark CO
applying for a mortgage getting new credit card

Applying for a mortgage? Here’s why you shouldn’t get a new credit card

Getting a new credit card with all those enticing rewards can be tempting. But if you’ve recently applied for a loan – especially a big one like a mortgage – hitting the brakes on new credit might be the smartest financial move.

Here’s why and what to do instead.

Hard inquiries can ding your credit score

Every time you apply for a new credit card, the lender conducts a hard inquiry on your credit report. A cluster of hard inquiries in a short period can lower your credit score.

Even a small decrease could affect your loan’s interest rate or jeopardize approval.

Your debt-to-income ratio matters

Lenders carefully assess your debt-to-income ratio (DTI), which compares your monthly debt payments to your income. A new credit card, even with a zero balance, increases your available credit and thus, your potential debt.

This negatively impacts your DTI, making you seem riskier to lenders.

Lenders like a healthy credit mix

A good credit mix demonstrates your ability to manage different credit types. This includes installment loans (mortgages, car loans) and revolving credit (credit cards).

Applying for a new card right after a loan application doesn’t give lenders a strong picture of your creditworthiness with revolving accounts.

Temptation to spend

New credit cards often have high limits, making it tempting to overspend. Focusing on saving for your new home and managing your current finances should be your priority – not adding another bill to the mix.

Focus on your loan approval

The stress of a loan application process is enough! Adding the management of a new credit card to your plate is unnecessary.

Prioritize successfully navigating your loan application and celebrate your new home before exploring additional credit options.

Closing on your loan

Once you close on your home and settle in, revisiting the idea of a credit card might make sense. Especially if it offers rewards that align with your new lifestyle.

For now, focus on getting that loan approved, and securing your dream home. That’s the top priority.

Oh, and if for some reason life gets in the way and you need to take out a credit card, make sure you speak with your lender first. The last thing anyone needs is a surprise at the end.