Credit scores are vital to your financial well being in so many ways that have nothing to do with purchasing a home.  For example, your credit score can impact what you are charged for auto insurance or whether or not a utility company requires a security deposit in order to get the lights turned on in your new home.

Here’s a good tip to improve your credit score – don’t pay off your credit cards; instead, get them all down to half or less of what you’re allowed to charge.  Ellen Jacobson is a Senior Mortgagage Banker with JP Morgan Chase and someone I’ve worked with for years.  She told me that most of the folks she sees think that they should pay off one credit card at a time in an effort to have fewer credit cards.  “Nothing could be further from the truth” she told me.  In fact, she said that closing a credit card can hurt your credit score. 

Of course no one is advocating that you maintain credit card debt but if you have several credit cards, try to make sure you keep them all no higher than 50% of what you are allowed and you should see an improvement in your credit score.  It’s also a smart idea to consult with your mortgage banker before you do anything.  Being careful is always a good idea.