Take care closing card accounts before mortgage application

Question for the CreditCards.com expert

Dear Credit Wise,
My husband and I are about to pay off all of our credit card debt. We never combined any of our credit when we were first married. We both have two cards of each, American Express, Discover, MasterCard and even Best Buy. Between the two of us we have 11 credit cards! We would like to combine the cards if that is possible, but we do not want to hurt our credit. We are not sure how to go about doing this. We are looking into buying a house in a year and a half or so. Any advice would be greatly appreciated. Thank you. -- Nicole

Answer for the CreditCards.com expert

Dear Nicole,
Congratulations on getting to the point where you can pay off all of your credit card debt. This is a crucial step as you prepare to buy a house and embark on the next stage of your married life. 

One thing you need to know is that you cannot combine credit, at least not in the sense of having one score and one report for both of you. You and your husband will always have separate credit reports and separate credit scores. This is true even if you are on one another's accounts, either as a co-applicant or as an authorized user. When the time comes to apply for your mortgage, your lender will pull both of your credit reports and base the lending decision on what is in each of your reports. Your future mortgage will be reported to the credit reporting bureaus for both of you on your individual credit reports.

I have to start by challenging your idea: This isn't the best time to be combining credit, if by doing so you will be closing down any of your card accounts. The reason is that this is a bad time to lose any points off your credit scores, since high credit scores translate to getting a mortgage at the best rates. Either closing old accounts or opening new ones risk damaging your credit scores at a critical time.

Closing accounts will reduce the amount of available credit you have, and 30 percent of your credit score is based on credit utilization, which is the ratio of the amount borrowed to the amount of credit available. You want to keep credit utilization as low as possible. You're about to get it to 0 percent utilization by paying off your credit card debt, but if at any time before closing if you run up any debt, that will raise your utilization and hurt your score.

So you may want to hold off on the credit combination until the mortgage is in hand. If you do want to go ahead now, be certain you'll not carry any balances, and don't take action that will reduce your individual credit limits.

If your goal is to have accounts that you can both use and reduce the number of cards you have together you have a couple of options.

You could both add the other to your accounts as an authorized user, which would allow you both to have access to all of your accounts. You could also look at each card and determine which has the best terms, add the partner who is not now on that account as an authorized user, and close the other account.

You could also close all the accounts and start over with new joint accounts. This is the option that your creditors would probably suggest if you call to inquire about combining the accounts. Do not take this option. Each time you open a new card, it causes a "hard inquiry" on your credit report, which dings your score by a few points. When you're trying to get a mortgage, you need every point you have.

No matter what you decide about the cards, you have already made the best decision for your future. Paying off your credit card debt will allow you to put your best foot forward with your future mortgage lender.

Be wise with your credit!

See related: How to close a credit card account without damaging your score

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Updated: 11-17-2018