Inactive Credit and Mortgages

Summary

Mortgage lenders evaluate a borrower in part on their credit report.

Mortgage lenders like to see a borrower who has been able to manage a reasonable number of credit lines in the past several years.

This establishes a track record for a borrower that lenders can evaluate.

Basics

Your credit report reflects:

• what kind of credit you have
• how active you have been in using your credit

What Kind of Credit You Have

A lender can learn a great deal about you from your credit report. This includes:

• how many credit lines you have
• how well you have paid these credit lines in the past
• which accounts are active
• which accounts are closed
• which accounts are delinquent
• the types of accounts you have

Lenders like to see good credit management. This involves having a variety of credit for a while with prompt payments being made.

Delinquent items such as collections can lower your credit, so it is best to try to resolve them as soon as possible.

How Active You Have Been In Managing Your Credit

Even if you have a good track record in the past on your credit you may still have issues.

If you haven't used many of your credit lines recently the mortgage lender may wonder how good you will be at managing your credit.

If you have many credit cards that have zero balances and have not been used for several years then your credit is relatively inactive.

Mortgage Lenders

You may still be able to make the case that you should be approved.

You may be better off starting to reuse some of your dormant credit to rebuild your credit activity.