Credit Scores

Before they decide on the terms of your mortgage loan, lenders want to find out two things about you: your ability to pay back the loan, and your willingness to pay back the loan. To figure out your ability to repay, they 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. You can learn more about FICO here.

Credit scores only take into account the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's likelihood to repay a loan.

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

For the agencies to calculate a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to generate an accurate score. Some folks 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 questions about credit reports and many others. Call us at 9722039033.