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For nearly every mortgage program, a borrower's credit score impacts either the likelihood of approval, the available interest rate, or both.

A credit score is a statistic. It determines the probability of a borrower defaulting on a mortgage. The second largest factor in calculating a credit score is Extent of Indebtedness, or how much money is owed by the borrower.  It comprises 30% of your overall score.

Extent of Indebtedness in plain English reads:

What is the ratio of your overall credit balances to your overall credit limits?

In other words, are you "maxed out" on your credit cards?

As a general rule, the more you are using of your available credit, the lower your credit scores will be. The ideal percentage of credit balance to credit limit is around 35%.

Anything over 70% can be hazardous.

So, if you are currently carrying high credit card balances, one "trick" to improve your credit profile is to move balances to other cards that have capacity. If you have 4-5 cards at 10% of their credit limit, you can shift your liabilities from the 70% card to the cards that are currently low balance.

"But my 70% card has a 2.9% introductory rate; the other cards are at 18% or more!"

Yes, I know. Remember that my advice here is only in the context of credit score. If you don't need to open new credit in the coming months, I would not recommend increasing your cost of credit as in the question above.

This discussion is only for people who know that they need their credit in the near-term.

By shifting credit card balances among your cards -- even if the rate of payment is much higher -- you can save yourself money month over month.

Consider the following example in which a person is applying for a $300,000 mortgage:

• Credit Card #1: $20,000 balance at 2.9%, $48.33 monthly. Credit Limit is $20,000.
• Credit Card #2: $1,000 balance at 18.0%, $15.00 monthly. Credit Limit is $18,000.
• Credit Card #3: $1,000 balance at 18.0%, $15.00 monthly. Credit Limit is $5,000.
• Credit Card #4: $1,000 balance at 18.0%, $15.00 monthly. Credit Limit is $4,000.
• Credit Card #5: $1,000 balance at 18.0%, $15.00 monthly. Credit Limit is $1,000.
• Total Monthly Credit Card Payment: $108.33
• Credit Score: 640
• Mortgage Interest Rate: 6.75%
• Mortgage Payment: $1,945.79

Now, let's shift some of those credit card balances and re-assess the same situation:

• Credit Card #1: $10,000 balance at 2.9%, $24.16 monthly. Credit Limit is $20,000.
• Credit Card #2: $9,000 balance at 18.0%, $135.00 monthly. Credit Limit is $18,000.
• Credit Card #3: $2,500 balance at 18.0%, $37.50 monthly. Credit Limit is $5,000.
• Credit Card #4: $2,000 balance at 18.0%, $30.00 monthly. Credit Limit is $4,000.
• Credit Card #5: $500 balance at 18.0%, $7.50 monthly. Credit Limit is $1,000.
• Total Monthly Credit Card Payment: $234.16
• Credit Score: 720
• Mortgage Interest Rate: 6.00%
• Mortgage Payment: $1,798.65

Example #2 shows savings of $21.31 over Example #1 because the higher credit score resulted in a lower mortgage interest rate. There is no reason why a person cannot re-shift all of their credit debt immediately after their mortgage closing.

By having a higher credit score, a homeowner not only has access to lower interest rates, but also has access to more types of mortgage products. This, too, can result in lower monthly payments with the help of a mortgage professional.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.