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Inflation is clearly hitting Americans hard. Federal Reserve data shows consumers racked up a jaw-dropping $25 billion in debt in September, capping the fastest nine-month surge of debt the nation\u2019s ever seen.<\/p>\n
\u201cIt\u2019s a telltale sign that people in our country are struggling with inflation,\u201d mortgage expert Shivani Peterson explained on a recent episode of The Mortgage Reports Podcast.<\/a> \u201cAs everything goes up in cost, people are probably using their credit cards to survive.\u201d<\/span><\/p>\n If you\u2019re one of the many Americans who has turned to credit cards in recent months, it could impact your ability to secure a home. <\/span><\/p>\n Wondering if you can still buy a house with credit card debt? Here\u2019s how Peterson recommends managing your debts.<\/span><\/p>\n <\/p>\n First, be prepared to manage your spending. As Peterson explains on the podcast, credit cards aren\u2019t inherently bad. It\u2019s all in how you use \u2014 or misuse \u2014 them.<\/span><\/p>\n \u201cUsing credit cards is not a bad thing,\u201d Peterson says. \u201cIf you are very responsible with credit cards, live within your limits, and pay it off every month, then a credit card is a great way to accumulate points to travel for less cost and get cash back. They also build your credit scores<\/a>, and they help us, as lenders, understand how you manage debt.\u201d<\/span><\/p>\n If you spend too much or fall behind on payments, though, credit cards are another story.<\/span><\/p>\n \u201cIf you tend to overspend, then credit cards probably aren\u2019t the safest strategy in your financial toolbox,\u201d Peterson says. <\/span><\/p>\n You should also aim to keep your credit utilization low \u2014 meaning only use a small percentage of the total credit line you have available. <\/span><\/p>\n \u201cYou want to keep your utilization at a certain percentage to keep your credit score high,\u201d Peterson says. \u201cThat percentage is between 30 and 50%.\u201d<\/span><\/p>\n So if your total credit line is $10,000, you shouldn\u2019t carry a balance of more than $5,000, but ideally under $3,000 \u2014 at least if you\u2019re hoping to buy a house.<\/span><\/p>\n If you pay off a card balance in full, it can be tempting to close the card for good (no more temptation to spend, right?) <\/span><\/p>\n Actually, if you\u2019re looking to maximize your credit score<\/a>, closing long-running accounts can hurt you. That\u2019s because credit history \u2014 or how long you\u2019ve had your accounts \u2014 makes up about 15% of your total credit score. <\/span><\/p>\n \u201cDo not close those credit cards as you pay them off and down,\u201d Peterson says. \u201cJust leave them open. Keep it at home and not in your wallet, so you won\u2019t be tempted.\u201d<\/span><\/p>\n You should also be sure the card doesn\u2019t have an annual fee that will sneak up on you, as it could hurt your credit score if you don\u2019t stay on top of it.<\/span><\/p>\n \u201cif you have an annual fee sneak up on you on a card you haven\u2019t used in two years, you may not pay that fee, and you\u2019ll have a balance of like $200 for the annual fee sitting on your credit card,\u201d Peterson says. \u201cAnd then, all of a sudden, you\u2019re getting 30-day late notices on this balance.\u201d<\/span><\/p>\n Finally, think about paying off your credit cards with lower-interest products. This might mean taking out a debt consolidation loan or getting a balance transfer card.<\/span><\/p>\n If you already own a home, there are other options to explore. While the days of cash-out refinancing with ultra-low rates are gone, products like home equity loans<\/a> and home equity lines of credit<\/a> could work. These tend to have much lower rates than credit cards and can let you use your home equity to consolidate debt affordably. <\/span><\/p>\n Just make sure you know the details of the HELOC if you choose that route.<\/span><\/p>\nListen to Ivan on The Mortgage Reports Podcast!<\/h3>\n
\nKnow your habits.<\/strong><\/span><\/h2>\n
Keep your balances low.<\/strong><\/span><\/h2>\n
Keep your old cards open.<\/strong><\/span><\/h2>\n
Pay credit cards off with lower-interest options.<\/strong><\/span><\/h2>\n