Credit Scoring

Before lenders make the decision to give you a loan, they must know if you are willing and able to pay back that mortgage. To figure out your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use 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). You can learn more about FICO here.

Credit scores only take into account the info contained in your credit reports. They never consider your income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's willingness to pay back a loan.

Your current debt level, 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 will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your credit to build a score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

The Mortgage Exchange Service LLC can answer questions about credit reports and many others. Call us at 703.255-5810.

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