How does credit card debt affect your credit score?

Since you will be utilizing less of your available credit and lowering your credit utilization, paying off your credit card debt can improve your credit score (which accounts for about a third of your credit score).

Lenders can notice that you have more money available from your income to pay your mortgage. It's not necessarily necessary to have a perfect score, though, to get a favorable interest rate.

If you have a strong credit score (at least 670) and meet the requirements for a private mortgage loan (an FHA loan requires a fair credit score of 580), you can typically purchase a "point" for an additional 1% of the loan amount to lower the interest rate from, say, 5% to 4%. That might turn out to be a wise investment in the long run.

Holding onto your mortgage for a few years, allowing equity to grow, and then refinancing to a cheaper rate is an alternative. As the price of real estate could decrease, mortgage rates could increase, or both, this can be a riskier option.

As credit card debt is expensive, it should be the first item on your list of debts to pay off. Yet as long as your DTI % is low enough and you have high to excellent credit, buying a property straight immediately won't necessarily be a barrier to loan approval.
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