About Your Credit Score

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

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

Your credit score comes from your repayment history. They don't consider income or personal characteristics. 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, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score results from both positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise it.

Your credit 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 sufficient information in your report to build a score. Should you not meet the criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.

Not Your Average Lender can answer questions about credit reports and many others. Call us at 9722039033.