Halt card spending until after mortgage closes

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
I am currently in the home buying process, in underwriting now. I've had to use my credit cards a bit since our mortgage lender last pulled our credit report. I can pay the credit cards back down before closing, however, the billing cycle won't end until after closing. Will this affect my closing? My monthly minimum payment on my credit card hasn't changed, just the balance.

My question is, can I request that the credit card company report the new balance early, before the billing cycle is over? Thank you!  -- Kate


Dear Kate,
This is a common problem. When people are buying a house, perhaps even selling another house or making a major move, they tend to have unusual expenses. They may normally spend only a few hundred dollars a month on their credit cards, perhaps even paying it off by the end of every billing cycle.

Then, just when they need their credit score to look its best, they use their cards for furniture, moving expenses, home repairs and more. Some people are aghast when the lender tells them they have a high debt ratio on their credit history. They may protest that it should be zero, because they pay it off every month. However, as you know, the credit bureau reports the balance at a given point in time, and if you just slapped thousands of dollars of spending on your card, that's what might show up on your report.

A person may assume that, once their credit reports have been pulled, it won't matter if they start buying things for the new house on plastic. The credit report is in writing, the loan is in underwriting -- what difference can it make if they buy a house full of furniture right before closing? Unfortunately, it can make a big difference. It might mean no loan and no house to put all that new furniture in if the lender pulls the credit report again right before closing.

When you are in the final stages of getting a mortgage, it's a good idea to stop using your credit cards, or at least cut way back on credit card spending. Pick out the furniture, but don't buy it yet. If you do buy a large item, consider paying down your card immediately online, so you're not caught with a high balance just on the day your bank reports to the credit bureaus.

It's possible that your recent credit card spending won't affect your loan at all. On the other hand, if your debt utilization ratio is already high, go ahead and pay down your credit cards now, regardless of the end of your billing cycle. If your mortgage broker thinks it's a good idea, you can have him pay to have your credit score manually updated after you pay off the cards. Rapid rescoring is a way to get your credit report updated in days -- not weeks or months. You can't do rapid rescoring yourself. Your broker must set it up for you.

The best thing you can do during the application and underwriting process is to keep in communication with your mortgage broker. He or she can tell you if the credit card balances will be a problem, and give you a chance to fix them before they derail your loan. Good luck, and I hope you enjoy your new home for many years to come.

See related: Tips to boost credit sore enough to qualify for a mortgage, 5 steps to a mortgage-worthy credit profile

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Updated: 03-25-2019