r/CRedit • u/LankyCommission7106 • 8d ago

Mortgage Good debt?

I hear it’s good to have different types of debt to diversify your credit file. When buying a home would it be best to have small amount of debt in each category like revolving and installment debt OR would it be best to have 0 debt?

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u/inky_cap_mushroom 8d ago

Debt is not necessary to qualify for the best rates on a mortgage. You can do so with only revolving accounts which do not cost any interest.

You should not apply for anything when you are hoping to get a mortgage soon. Hard pulls are scored for 18 months for with FICO 2,4,5. If you want to optimize your credit ahead of a mortgage application you will want to avoid opening new accounts or seeking additional credit.

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u/LankyCommission7106 8d ago

I only ask because I’m debating on paying my car loan off this year and buying a home next year.

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u/inky_cap_mushroom 8d ago

You may see a score drop from having no open installment loans, but it’s almost always pretty minimal. You’re unlikely to get better rates from keeping it. Everything above about 750 gets the best possible rates. Keep in mind mortgage lenders will care a lot about your DTI and you will be able to save up a down payment much faster if you’re not paying interest needlessly.