Credit Scoring

Before lenders make the decision to lend you money, they need to know that you are willing and able to repay that loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.

Your credit score comes from your history of repayment. They don't take into account your income, savings, amount of down payment, or factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's willingness to repay a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

To get a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is enough information in your report to generate a score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about credit reports and many others. Call us: 214-663-5355.