Credit cards and mortgages might seem like two separate parts of your financial life—but when you’re getting ready to buy a home, they’re closely connected. How you use (and don’t use) your credit cards can directly impact your approval odds, your interest rate, and even how much you’ll need for a down payment.
Credit card debt is at record highs
As of mid-2025, Americans owed about $1.21 trillion on credit cards (Federal Reserve Bank of New York).
High balances drive up your debt-to-income (DTI) ratio and lower your credit score—two of the biggest factors lenders consider. Ideally, your DTI should stay below 43%, and your credit utilization under 30% of your available credit. Both show lenders you’re in control of your money.
Why you actually need a credit card
Some buyers think avoiding credit cards altogether will make them look “responsible.” In reality, you need credit history to get a mortgage at all. Using a card, even for small monthly expenses you pay off in full, helps you build that history. Consistent use and on-time payments prove you can handle debt—which makes lenders more confident you’ll handle a mortgage.
Timing matters when paying down balances
If you’re gearing up to apply for a mortgage, the timing of your payments matters. Credit card companies typically report balances once a month. Even if you pay your cards off in full, if the statement closes while you’re carrying a balance, it can look like you’re maxed out. That temporary spike can drop your score at the worst time.
If you’re mortgage shopping, consider making an extra payment before your statement closes so your reported balance looks lower. It’s a small detail, but it can make a big difference in your mortgage rate—and when you add in the fact that lenders don’t all price loans the same, it’s smart to see how lenders stack up to see how much you could actually save.
The $0 balance misconception
Many buyers think you need to carry a balance to “show activity” or “build credit.” Not exactly true. Paying off your balance in full each month is the best move. You still get the benefit of credit history, utilization, and on-time payments—without throwing away money on interest.
Should you roll credit card debt into your mortgage?
Some homeowners consider using a cash-out refinance to pay off credit cards. While it can simplify payments, it usually means stretching short-term debt into decades-long interest—and risking your home if habits don’t change. For most buyers, it’s better to focus on paying balances down before applying, not after.
The takeaway for homebuyers
Credit cards aren’t just plastic in your wallet—they’re part of your mortgage application. Keep your utilization low, make payments early and consistently, and don’t assume you need to carry debt to build credit. Done right, your credit card habits can save you thousands on your future mortgage. And when you’re ready to borrow, don’t just look at the interest rate—see how different rates and points change your monthly payment so you know it actually fits your budget.