 TITLE: How to Get Your Credit Ready for a Mortgage CONTENT: Reduce Credit Card Debt\n-----------------------\nIf avoiding new debt helps burnish your credit, it's probably no surprise to learn that lowering existing debt can also help your credit standing. Paying down credit card balances is a great way to address this. Paying them off altogether is an ideal goal, but that isn't always feasible within the span of a year or less. In that case, it's wise to be strategic about which balances to tackle when paying off your credit cards.\nOne of the biggest influences on your credit scores is credit utilization ratio—the percentage of your credit card borrowing limits represented by your outstanding balances. Understanding how credit utilization affects your credit scores can help you determine the smartest approach to paying down your current balances.\nYour overall credit utilization ratio is calculated by adding all your credit card balances and dividing the sum by your total credit limit. For example, if you have a $2,000 balance on Credit Card A, which has a $5,000 borrowing limit, and balances of $1,000 each on cards B and C, with respective borrowing limits of of $7,500 and $10,000, your total your utilization ratio is:\n($2,000+$1,000+$1,000)\n\\=\n$4,000\n\\=\n18%\n($5,000+$7,500+$10,000)\n$22,500\nYou also can calculate the utilization ratios on each individual card:\nMost credit scoring models start to ding your scores once utilization ratios near or exceed 30%. Total utilization is the most important factor—and paying down any portion of a card's balance reduces that—but the guideline also applies to utilization ratios on individual cards.\nIn our example, the total utilization ratio of 18% is well under 30%, but the ratio for Card A is significantly over that amount, at 40%. So when determining how best to pay down debt to promote credit score improvement, it'd make sense in this case to focus first on reducing Card A's balance.\nThe 30% figure is more of a general recommendation than a hard target. If you reduce your total utilization ratio from 32% to 29% you shouldn't expect a major surge in scores. Nevertheless, higher utilization typically leads to lower credit scores, and vice versa. END