Credit Scores

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to discover two things about you: whether you can pay back the loan, and if you will pay it back. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to assess creditworthines. For details on FICO, read more here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is now. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to repay a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

To get a credit score, you must have an active credit account with six months of payment history. This history ensures that there is enough information in your credit to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply for a loan.

Not Your Average Lender can answer your questions about credit reporting. Call us at 9722039033.