By Leanne Mollica
Mortgage Broker | Mortgage Architects – Team Borle
Founder, My Mortgage Strategy
Serving Salmon Arm, the Shuswap, and British Columbia
One of the most common (and sneakiest) mortgage myths I hear is this:
“All debt is bad. I should pay everything off and close my credit cards before applying for a mortgage.”
It sounds responsible.
It feels like the “right” thing to do.
But in many cases, it can actually hurt your mortgage application.
Let’s break this down.
The Truth About Debt and Mortgages
When it comes to mortgage approvals, lenders are not looking for zero credit — they’re looking for healthy, well-managed credit.
That means they want to see a history that shows:
- You can borrow money
- You can manage it responsibly
- You make payments on time
No credit history (or very limited history) can be just as challenging as poor credit.
The Common “2-2-2” Credit Rule (Varies by Lender)
While every lender has their own guidelines, many follow a version of what’s often referred to as the 2-2-2 rule:
- 2 active trade lines (credit cards, car loans, lines of credit, etc.)
- At least 2 years of credit history
- $2,000+ credit limits on revolving accounts
This helps lenders assess risk and confirm that your credit profile is established and reliable.
Why Closing Credit Cards Can Backfire
Even if a credit card is paid off, closing it before speaking with a broker can do more harm than good.
Here’s why:
- It reduces your available credit
- It increases your credit utilization ratio
- It may shorten your average credit history
- All of the above can lower your credit score
In other words, paying something off doesn’t automatically mean you should close it.
The Real Goal: Healthy Credit, Not Zero Credit
A properly managed credit card, car loan, or line of credit can actually strengthen your mortgage application.
What matters most is:
- Low balances relative to limits
- On-time payments
- Stability over time
Debt used strategically and responsibly is very different from debt that’s out of control.
Before You Make Any Credit Moves — Talk to a Broker First
Every credit decision has a ripple effect.
What helps in one situation might hurt in another.
Before you:
- Pay off accounts
- Close credit cards
- Consolidate debt
- Make large financial changes
…it’s always best to review the full picture with your mortgage broker.
Sometimes, the smartest move is actually doing nothing until we’ve mapped out the right strategy.
No Shame. No Myths. Just Strategy.
If you’re thinking about buying, refinancing, or planning ahead — and you’re unsure what to do with your credit — I’m here to help.
Let’s make sure your credit is working for you, not against you.
📍 Serving the Shuswap, the Okanagan, and all of BC
📞 250-300-2008
📩 Reach out anytime — questions are always welcome