I Have To Use My Credit Cards?

You would think that not having active credit, not using your credit cards a lot, would be a good thing. I recently had a loan application where my client had one piece of active credit. The only credit card that he used was his American Express card. He had no mortgage. He was a renter. He had no car loan. He paid cash for his car. He had no student loans. Low debt user and he only had one piece of active credit. Apparently that was a problem with this lender. The underwriter called me and said, “We require three pieces of active credit.”

So, now there’s another concern to add to the list of growing concerns. Some underwriters and some lending institutions want to see that you’ve got three or four pieces of active credit to substantiate that you know how to manage your credit. Apparently, if you have one piece of credit active and you pay cash for everything else, that’s a problem.