About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders need to find out two things about you: your ability to repay the loan, and if you will pay it back. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. In order to assess your willingness to pay back the loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on FICO here.

Your credit score is a result of your repayment history. They never take into account your income, savings, down payment amount, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding other demographic factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score comes from the good and the bad of your credit history. Late payments count against you, but a record of paying on time will improve it.

Your report must 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 sufficient information in your report to build a score. If you don't meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

Debbie Oliver NMLS License #248252, America's First Choice Mortgage, NMLS License #279234 can answer questions about credit reports and many others. Call us: 2146635355.