Mortgage, Credit Score and Credit Card Churning Question

A TravelSort readers writes “My wife and I will be applying for a mortgage sometime over the next year. I'm new to miles and points and am kicking myself for having missed the AMEX Platinum 100,000 points offer in January. I'd be very tempted to apply for it if it reappears or I receive a targeted offer. Would 1 churn or at least 1-2 credit card applications be ok in the year prior to applying for a mortgage? My credit scores are in the 750-770 range and my wife's are in the 720-760 range.

With a mortgage, I advise *not churning* credit cards for at least 1 year prior to applying, in order to secure the best possible mortgage rate. Particularly if your mortgage is a large one (keep in mind I live in NYC, where a nice 2 bedroom condo in a good area of Manhattan can easily go for $2.5 Million or more) it's just not worth it to risk qualifying for a lower rate because of some recent credit card inquiries. 

Naturally you'll find posters on Flyertalk and elsewhere note that they got a great rate even after applying for a few credit cards prior to applying for a mortgage, but why risk it? It may be hard to turn down a really great offer, but offers come and go, and there will be other offers after you receive your mortgage.

Here's a quick FAQ based on other questions I've gotten about mortgages, credit scores and applying for credit cards:

How Far in Advance of Applying for a Mortgage Should I Stop Applying for New Credit Cards?

My recommendation would be to slow down (no extensive churning) 18 months prior, and to not apply for new credit cards for 1 year, or as close to that as possible, prior to applying for a mortgage. You'll find folks advocating anywhere from no churning 2 years prior to just stopping 6 months prior, so my position is neither the most conservative or the most aggressive. Ultimately only you can decide what's right for your particular situation.


Whose Credit Score Will They Use When a Husband and Wife Apply for a Mortgage?

Lenders will generally look at the three credit scores (Experian, Equifax and Transunion) for each person, and take the lowest middle score. For example, if one spouse has scores of 780 750 and 730 and the other has scores of 690 720 and 740 the lender would use the 720, since it's the lower of the two middle scores, 750 and 720.


What Should We Do if My Spouse and I Have Different Credit Scores?

If it's possible for the spouse or partner with the higher credit scores to qualify for the mortgage on his or her income alone, I'd recommend that. A nice upside of this is that, if the spouse or partner not applying for the mortgage still has a strong credit score (just not as high as the partner applying for the mortgage) that person can continue to apply for new credit cards, while the partner applying for the mortgage takes a hiatus.

If that's not an option as you need both incomes to qualify, I'd focus on improving the credit score of the partner with the lower score. See our post Understand How Your Credit Score Works to Maximize Credit Card Rewards. Also consider using your business credit cards more and keeping spend on personal credit cards low, as this helps have low utilization. Business credit card utilization is not reported to the credit bureaus, only personal credit card utilization is.


Do Hard Credit Pulls Get Combined if They're Within a Certain Period of Time, When Mortgage Rate Shopping?

While I don't have personal experience with this, my understanding is that multiple hard pulls from Equifax and Transunion do count as one pull for each credit reporting agency if within ~4 weeks, and for Experian if within a ~2 week period. If someone has other data points on this, I'd love to hear them in the comments.


When Can Start Applying for Credit Cards Again? After Closing or After Funding?

I would definitely advise waiting until after funding, which usually occurs several days after closing and includes the mandated 3-day federal waiting period. While rare, it's possible for something to happen to the loan between closing and funding, and some lenders have been known to do another hard pull of your credit score during this period, so I don't recommend applying for a bunch of credit cards the night you close, although of course some folks do this and are fine. But why take the risk?

Related Posts

How Many Credit Inquiries or Hard Pulls Is Too Many?

Understand How Your Credit Score Works to Maximize Credit Card Rewards


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