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I've never had a credit card and the only debt I have is my student loan. A number of my friends and family who have credit cards have said that having one makes it easier to get a mortgage as you'll have a better credit history and show that you are capable of paying debts.

Is this true? I am concerned that not getting one would make it harder to get a house in the future and I don't really want to get one.

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    I'm not sure if you've heard of the housing crisis that crippled the economy a few years ago, but it all stemmed from banks being to easy to get a mortgage from, not too hard. They haven't changed significantly - they still want the easy money from mortgages. Just some food for thought.
    – corsiKa
    Jan 26 '18 at 7:11
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    I think country tag would help a lot.
    – Mołot
    Jan 26 '18 at 22:35
  • Could you clarify whether you're referring to buying a house soon or buying a house sometime in the somewhat-distant future? TTT and Egglz's answers are both accurate if you're looking at buying a house in a few years or so, but, if you're looking at buying one in, say, less than 6 months, the situation is different.
    – reirab
    Jan 28 '18 at 9:42
  • @reirab In the distant future
    – user10950
    Jan 29 '18 at 18:28
  • Yes having one - and having a higher limit - will increase your credit score IF you make your payments 100% on-time. Jan 30 '18 at 14:02
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I don't really want to get one.

Then don't get one - if you paid your student loans on time and have enough income you should have no trouble getting a mortgage. Having a credit card won't make it easier (presuming your credit history is good otherwise). What makes it easier is the amount of your down payment, your income, and employment history.

Your credit history is just one part of your mortgage application - the bank will also look at your employment history, debt-to-income ratio, the loan-to-value (how much you are borrowing versus how much the house is worth).

If you do come across a bank that seems to want more credit history, then shop around and find a different bank. It is not logical to get a credit card just to tweak a credit score that should already be pretty good.

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  • "paid your student loans on time" --- there is no time limit on student loans, except they are written off after twenty-five years. To my knowledge no credit scorer takes them into account. [UK-specific comment for a UK-specific question.]
    – Calchas
    Feb 4 '18 at 17:51
  • @Calchas I mean male the monthly payments on time to avoid dings in your payment history.
    – D Stanley
    Feb 4 '18 at 18:53
  • If payments are necessary, they are taken directly from your PAYE salary, unless you are self-employed, in which case, they are in practice voluntary. Either way, don't think any credit scorer would know. Even the Students Loan Company don't know themselves until 6 months after the tax year finishes ...
    – Calchas
    Feb 4 '18 at 20:22
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Does having a credit card make it easier to get a mortgage?

Probably not in your case, but you should still consider getting one. From what you have described I would guess you have a decent credit score, but not a great one. (Reiterating what D Stanley said in his first paragraph:) When you have a decent score paired with verifiable income showing you can afford the house you wish to buy, then it will be easy for you to get a mortgage.

However, once your score is good enough to get a mortgage, having a higher credit score won't make it any easier to get a mortgage, but it will likely help you get a better interest rate. So, it's very likely that having a credit card with a perfect payment history will increase your credit score, and even a small interest rate reduction from the score increase could be a significant cost savings for you in the long run. Add to that the fact that you can find a free credit card that provides 1-2% cash back on all of your purchases, and you have two good reasons to obtain one. (There are other good reasons too, such as better purchase protection compared with debit cards, rental car insurance, etc.)

However, if you believe there is even a small chance that having a credit card will cause you to run up debt and/or make late payments on it, then absolutely steer clear from them. You'll have to do some soul searching to know if you can handle it responsibly or not.

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    I know someone who struggled for credit rating through insufficient evidence of being able to 'manage' debt sensibly (i.e. no credit card). Outside the norm looks like risk. Jan 26 '18 at 0:12
  • +1 for mentioning the rate. Being able to get a mortgage and being able to get a favorable rate are two different things. At least in the U.S., the best rates are usually reserved for people with high credit scores.
    – reirab
    Jan 28 '18 at 9:46
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I don't know what country you are from but the following is my experience in the UK from a few years ago.

I can tell you anecdotally that not having had any form of credit can cause you to have a lower credit score on the banks' internal scoring systems and I even saw applications fail credit scoring when there is little history to go on. Having a well maintained credit card can indeed improve your likely good to be approved for a mortgage. Missing credit card payments will be detrimental so it is important to use any credit responsibly.

Student loans do not necessarily show up on credit reports but will factor into an affordability check.

That said, however, it is possible to get approved anyway and the score can be overridden so if you do not want to get a credit card, you do not have to. It is also worth mentioning that a well maintained bank account can also contribute to your credit score.

Source: worked as a mortgage underwriter

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  • Also from the UK, I did not have a credit card when I applied for a mortgage, but I had previously had a loan which had run for 3 years, with all payments made on time. This counted a great deal towards getting a good mortgage rate. It's less about having a credit card and more about having a financial history, it just so happens that a credit card is about the easiest way to do this.
    – WhatEvil
    Jan 26 '18 at 14:37
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There are many things that a bank will look at to give you a loan - some of these things are data points that you can get a hold of (credit score) and other data points are proprietary. The point here, is that there are many factors.

The point of maintaining a credit card is to increase your credit worthiness along some of those factors. Compare these two scenarios:

  1. A young business professional (25 years old) has graduated college and finished paying down a small amount of student loan (< $40k). They now work a career and have 2 years in it, making decent wages. They have no other credit history.

  2. Same story as above, except this young professional took out a credit card when they turned 18. They now have 7 years of good credit history, showing all balances paid in full every month for 7 years.

Between the two people, which one has more evidence that they handle money well?

You don't have to get a credit card, for any reason. But, maintaining one can build up your credit history - giving evidence that you are good with your money.

If you can treat it like a debit card - never spending over what you actually have in your accounts, and pay it off monthly - never carrying a balance...then you'll see an increase in your credit score and overall credit rating. You'll also be able to reap some rewards (I travel a lot, it's nice getting travel points for things I was going to spend money on anyway)

If you can't treat it like this - then don't get one.

Either way, having one isn't required to get a mortgage. As for ease - how much money you bring to the table as a down payment is probably the most important factor.

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    As an anecdote, this worked very well for me. I opened a card when I was 18 and always paid it off every month. By the time I was 23 and ready to buy a house (and had no debt,) my credit score was already over 800, which made it very easy to get a mortgage at the best rates available at the time. Of course, having 20% down was also a huge help (no PMI.)
    – reirab
    Jan 28 '18 at 9:51
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Answers have been relatively correct in saying you don't necessarily need a credit card to to obtain a mortgage. It is also good to know having a credit card and keeping it in good standing will help with your credit worthiness. The part which answers on here are neglecting to touch upon is:

Why is it important to have a good credit standing?

A good credit standing will get you a better rate. A better rate means you'll be paying less over the course of the loan. Even a small amount of difference (say .5% APR), can mean a huge difference in the total amount of your loan (over 30 years for a standard mortgage loan) to the tune of thousands of dollars (or pounds or dinar or < insert your currency here >). A better credit standing will usually allow you more choices, which in the end will cost you less. Better choices can also mean better lenders, which can allow you to get a loan which will most likely not get sold to other institutions. Having your mortgage resold can cause you all kinds of headaches, such as where to send your mortgage payment to next month.

If you are thinking you need to assist your credit score via getting a credit card, you need to be doing it about at least a year out from when you plan on applying for your mortgage. When you get the card, it's considered new credit, which until it's established, is a detriment to your score. Only after its established will it help. If you are thinking about a mortgage in the near future, don't even consider looking at a credit card.

A credit card is not the end-all-do-all for getting a mortgage, but it can help you in the long run. Mind you, if you get a credit card and don't take care of it, it can be a huge detriment in getting a loan of any kind.

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When I was applying for a mortgage with the local credit union in the USA the loan officer got me to take a credit card with the CU. She said it would help boost my credit score which was so low they could not sell my mortgage on to the subprime market.

I don't know if it helped as at closing I still had a zero credit score, which amused every one present.

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    How do you get to FICO Zero? I'm impressed, and curious.
    – C8H10N4O2
    Jan 25 '18 at 22:20
  • you move to the USA from the UK and don't have any debts I think.
    – Ian Turton
    Jan 26 '18 at 9:10
  • It won't help in the short term (especially within a few months of getting a mortgage.) It will help in the long term. Also, I don't think it's possible for a FICO score to actually be zero. It is, however, possible to simply not have a FICO score, which is probably what you experienced. It's not opening a CC that suddenly gives you a good credit score, but rather having one that you pay on time every month for a few years (on which you ideally do not carry a balance from month to month and, therefore, pay no interest.)
    – reirab
    Jan 28 '18 at 10:03
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    @reirab FICO scores range from 300 to 850. But, if someone has managed to evade the credit agencies, and there's no history of anything, 0 (zero) is used as a placeholder in that field. Jan 28 '18 at 13:47
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Having a credit card doesn't necessarily make it easier to qualify for a mortgage. The question just isn't that simple.

If you have a credit card, but misuse it, have frequent late payments, or have a high percentage of your available credit frequently used, it will drive your creditworthiness/credit score down. On the other hand, if you use a credit card responsibly, pay it off in full every month on time, it will generally enhance your creditworthiness and drive your credit score up.

That's not at all to suggest having multiple credit cards makes things even better - in fact, just the reverse. Too many open, active credit card accounts can be seen as a potential risk for a sudden burst of unwise use, with the availability of so much credit. And that use is also measured against your income.

If you have little to no debt history other than student loans, a properly used credit card can a) enhance your ability to qualify for credit, and b) enhance your chances to get the most favorable rate/down payment combination.

Before you apply for a mortgage, take a few minutes and obtain your own credit report and get your FICO score. Anything in the 700's runs from good to excellent; above 800 is exceptional. If you get into the 600's, it gets iffier. Younger individuals with limited payment history can sometimes generate an artificially high FICO score even with little to no actual long-term debt repayment history. That's when lenders look at length of credit and age to determine whether that score might merit an asterisk.

Having only student loan debt as your history should not be an obstacle in getting a mortgage; it might, however, not afford you the best available rates. Getting a credit card and using it wisely, eg paying it 100% off every month, will, over time, enhance your credit history.

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    Most of this is right, but the third paragraph isn't quite right, at least for FICO scores specifically. "Too many open accounts" won't affect your FICO score much, if at all. "Too many recently-opened accounts," however, will definitely affect your score. Once the accounts have been open for a year or two, that effect will go away.
    – reirab
    Jan 28 '18 at 10:25
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    David, +1 from me, and I took the liberty to embolden one line up there. It was all I wanted to say, but not quite a full answer. The issue I didn't see anyone address is that no credit history (the zero score) might be better than a bad number. That line above is dead-on, knowledge is power, and the OP asked a question without having all the facts he might. Jan 28 '18 at 13:51
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Having a credit card will REDUCE your credit score regardless of whether you miss credit card payments or not.

There are multiple parameters while calculating credit card score. One of those parameters is "Revolving credit line". For our context, it means credit card. It's mere presence in your financial instruments will slightly reduce your credit score.

Since, you have student loan, it implies that you have a credit history. Hence, credit card won't be of any benefit to you.

If, in future, you decide to get a credit card, please ensure that your monthly credit card bill is very low as compared to your credit limit. It shall help you to improve your score. Also, don't miss any card bill payments as it will reduce your credit score.

P.S. : I am from India, but I think considerations for arriving at credit score are universal.

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  • I'm not sure if this is true in India or not, but it's definitely not true for FICO scores in the USA and also apparently not for the UK (see Egglz's answer.)
    – reirab
    Jan 28 '18 at 18:38

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