Can I Use My Credit Card After Closing on a Home?

Buying a home is likely the biggest purchase you’ll ever make After going through the lengthy process of getting a mortgage approved, securing a home, and finalizing all the closing paperwork, you can finally call yourself a homeowner! But now what? Can you go back to using your credit cards like normal? Or do you need to wait?

I just closed on my first home. During the process, I was very worried about how using credit cards might affect my mortgage approval and interest rate. I wanted to get the most out of the rewards on my cards, but I wasn’t sure if it was safe.

It was helpful to talk to my lender and do some research on how to use a credit card wisely before, during, and after closing on a mortgage. Keep reading to find out what I discovered.

How Credit Card Use Can Impact Your Mortgage

Lenders carefully look at your finances, including your credit report and scores, when you apply for a mortgage. Several things about how you use your credit card can affect their choice:

• New credit card accounts – Applying for several new cards in a short period can indicate risk and lower your credit scores.

• High utilization – Maxing out cards or using a large portion of your available credit raises your utilization rate and can reduce scores.

• Additional debt – Taking on new debt right before closing may make lenders question your ability to manage payments.

• Credit inquiries – Each application triggers a hard inquiry, which causes a small, temporary drop in scores.

Lenders want to see responsible credit management. If you make big changes to your profile, like getting more debt or opening a lot of new credit cards, you might not get approved or your interest rates will go up.

Best Practices for Credit Card Use

To avoid issues, experts recommend following these guidelines regarding your credit cards when buying a home:

• Before preapproval – Avoid opening new cards several months beforehand. Also, try to lower utilization rates below 30%.

• During underwriting – Don’t open new accounts or make big purchases. Keep spending and payment activities consistent.

• At closing – You can safely use cards for closing-related expenses with no impact.

• After closing – Wait 1-2 billing cycles before applying for new cards to avoid further credit inquiries.

The safest approach is maintaining the status quo starting a few months before applying through when you close. Major changes to your profiles could raise red flags and put your approval at risk.

When Can I Start Using Credit Cards Again?

You don’t have to refrain from using cards completely after closing. However, I suggest waiting 1-2 billing cycles (around 2 months) before applying for new accounts. This gives your mortgage a chance to officially process and avoids further inquiries right away.

In the meantime, you can begin using your existing credit cards again for regular purchases as long as you stick to your normal spending habits. Just be sure to:

• Pay balances in full each month
• Avoid unnecessary high expenditures
• Keep utilization below 30%
• Make payments on time

Follow these rules, and your credit scores should remain stable. After a couple billing cycles, you can consider a new card, especially if it offers rewards on expenses related to your new home.

Just be sure to only open one account at a time going forward. Applying for too much new credit at once can negatively impact your credit scores.

Using Credit Cards Strategically as a New Homeowner

As a homeowner, you can leverage credit card perks to help furnish, maintain, and improve your home over time. Consider getting cards that offer bonus rewards in these categories:

• Home improvement – Earn extra points on appliance purchases, furniture, renovations, and more.

• Utilities – Certain cards give higher rewards for cell phone bills, cable, internet expenses, and energy providers.

• Home services – Receive increased cash back on services like landscaping, house cleaning, and pet care.

• Travel – Cards that allow you to earn miles, hotel points, or cash back can offset the cost of visiting friends and family in your new home.

• Cash back – Flat-rate cash back cards are useful for non-bonus spend like groceries, gas, and everyday purchases.

Read the fine print so you understand which specific expenses qualify for boosted rewards with any card you consider. Pick ones that align with your planned spending.

And as always, make sure to only spend what you can afford to pay off in full.

Key Takeaways on Credit Card Use After Closing

Buying a home is an exciting milestone! With some prudent planning, you can keep your finances on track and even take advantage of credit card perks along the way. Here are the key tips to remember:

• Avoid new cards and large expenditures from preapproval through closing.

• Wait 1-2 billing cycles after closing before applying for a new card.

• Use your existing cards moderately and make payments on time.

• Consider strategic cards that offer bonuses on home-related spending.

• Only open one new account at a time going forward to limit credit inquiries.

Follow this measured approach, and you can comfortably use credit cards to maximize rewards without jeopardizing your finances as a new homeowner. Just stay focused on smart management habits.