Everyone thinks paying off debt helps you qualify.
Sometimes it does.
Sometimes it hurts you.
It depends on three numbers.
1. Your Credit Score If paying off a credit card boosts your score significantly, it may improve your loan pricing.
2. Your Debt-to-Income Ratio (DTI) If you’re close to max DTI, paying off a car or credit card can increase your buying power. But paying off a small installment loan may not move the needle much or may hurt your score, then you will have a new problem to deal with.
3. Your Cash Reserves If wiping out debt leaves you with zero savings, that can weaken your profile. Liquidity matters.
Strategic Rule
Pay off revolving debt first.
Keep cash reserves intact.
Run the numbers with a lender before paying off any installment debt.
Bottom Line
Don’t drain your savings without knowing the impact. I can run your approval both ways and show you exactly what helps and what doesn’t.
