People generally attack the largest balance. For mortgage qualification that is often the wrong target, and the right one can be a few thousand dollars away rather than tens of thousands.
The payment is what counts
Qualification runs on debt service ratios, which compare monthly obligations to monthly income. A $30,000 car loan on an aggressive four-year schedule can consume far more room than a $60,000 student loan on a long, gentle one. Sort your debts by monthly payment, not by size, and the priority order usually changes.
Unused limits still cost you
Most lenders count a notional payment against the limit of a revolving account rather than the balance you carry. A line of credit sitting at zero with a large limit can still be reducing what you qualify for. Reducing a limit you do not need, or closing an account you never use, can change the number measurably and costs nothing.
A practical order
- Pay out any small loan whose monthly payment is disproportionate to its balance.
- Reduce or close revolving limits you do not use.
- Bring any card that reports near its limit well below it.
- Leave a long, low-payment debt alone if paying it out would drain the down payment.
Do not close your oldest credit account in the run-up to an application. Length of history helps your credit profile, and the room you gain rarely offsets the score you lose.
Your next useful step
See whether restructuring the mortgage improves the full monthly picture, not just the rate.
