A Score that Really Matters: The Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders must know two things about you: whether you can pay back the loan, and your willingness to repay the loan. To understand your ability to repay, they look at your income and debt ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Credit scores only assess the info contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider solely that which was relevant to a borrower's willingness to repay the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad of your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

Your report must have 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 payment history ensures that there is sufficient information in your credit to build an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage loan.

Turnkey Mortgage Group - NMLS#70160
David Yeary, Mortgage Loan Originator NMLS#1837725 can answer your questions about credit reporting. Call us at 7133252099.

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