A Score that Really Matters: Your Credit Score
Before lenders decide to lend you money, they want to know that you are willing and able to repay that mortgage. To assess your ability to repay, they assess your income and debt ratio. To assess how willing you are to repay, they use your credit score.
The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO here.
Credit scores only consider the info in your credit reports. They never take into account your income, savings, amount of down payment, or personal factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding any other personal factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.
Your report should contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This history ensures that there is enough information in your credit to assign a score. If you don't meet the criteria for getting a credit score, you might need to establish a credit history before you apply for a mortgage loan.
Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer your questions about credit reporting. Call us: 2146635355.