One of the last things you want to have when applying for a new mortgage loan is a recent history of missing the monthly payments on your existing mortgage. At the same time, though, the creators of the credit scoring computer programs know that most people, when faced with a shortage of money, will make a greater effort to keep their mortgage payment current than to make the minimum payment required by their credit cards. Therefore, credit scoring uses credit card payments as a primary indicator of how well a person will handle loans.

Credit scores, as a result, are crunched in ways that may surprise most of us. Your score will be better if you do carry a small balance on a few credit cards and if you make your monthly payments promptly and fully. If you have no credit cards, your score reflects a lack of evidence that you handle money well; if you carry no balance, there is little evidence of any borrowing activity.

Taking this one step further, if you pay off your large credit card balances in one lump sum, red flags are raised. You will need to establish a good payment record after paying off credit card balances in order to firm your repayment record and raise your credit score.

You can and−in many cases should−get help from your real estate and mortgage advisors on this. It means a lot of money to you potentially.