Credit Scoring

Before lenders make the decision to give you a loan, they have to know that you're willing and able to repay that loan. To assess your ability to repay, lenders assess your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more about FICO here.

Credit scores only consider the info contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's likelihood to repay the lender.

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 is calculated wtih both positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 history ensures that there is enough information in your report to generate an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage loan.

The Mortgage Exchange Service LLC can answer your questions about credit reporting. Call us: 703.255-5810.

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