Pay down credit cards first, then apply for a mortgage

Americans typically spend $800 on gifts during the holidays, according to Credit Plus Inc., a national credit-reporting agency. And most of that spending is frequently of the buy-now, pay-later variety.

As consumers chip away at credit card bills, those who are planning a home purchase need to consider the effect such debt has on their credit ratings.

Pay those bills off, if possible, experts advise. Reducing a balance to zero can improve a credit score.

If the credit card holder can’t pay the balance off, then at least pay it down. Reducing a balance to 30% or less of the limit can also raise a credit score.

But don’t start getting rid of those cards as a way to curb future spending. Canceling them, the pros explain, can lower a credit rating.

Can’t keep up with payments let alone pay down a balance? Seek help from nonprofit ByDesign Financial Solutions, formerly known as the Consumer Credit Counseling Agency of Los Angeles, and other reputable credit counseling agencies.

And it’s not too early to start your financial planning for this December.

Protect a good score by developing and sticking to a budget, saving a predetermined amount from each paycheck throughout the year for holiday gifts, and spending cash when you do shop instead of running up charge cards.

Improving a low-to-middling score is important before applying for a mortgage.

The higher the score, the better the terms, the lower the interest rate and the lower the monthly payment.

gayle.pollard-terry@latimes.com