Your Credit Balances, Your Credit Score, and Your Mortgage

Summary

Your credit report lists all of your recent creditors. The information on the credit report includes your current balance on each account and the maximum available credit.

This is a critical part of your credit report and your credit score.

It can help determine if you are approved for a mortgage, and the type of loan and terms you are offered.

Knowing how this works may help save you thousands of dollars.

Basics

Your credit balance is affected by:

• outstanding balance
• maximum available credit
• total credit lines

Outstanding Balance

Your credit report is usually very up to date with your balances on each account.

Check your credit report to see if this is true. If not, you may be able to provide your mortgage lender with updated proof that your mortgage balance is lower. For example, you may have paid off a credit card entirely but this has not shown up on your credit report yet.

Mortgage lenders will also look at your monthly debt burden in deciding whether to approve your loan, or what size loan you are eligible for.

Maximum Available Credit

Your credit score starts becoming affected when your outstanding balances become close to the maximum available credit. This is easy to see on a credit report.

Your maximum available credit should be accurate, but it may not reflect any recent changes in maximum available credit.

Total Credit Lines

This is the total number of credit lines you have that have large outstanding balances.

If you have small credit card maximum available limits you may not have run up much debt even though you are close to your limits. This may be treated differently by a mortgage lender than a borrower who has much larger outstanding balances on larger credit lines.