Credit Scores

Before lenders decide to lend you money, they want to know that you are willing and able to pay back that mortgage. To assess your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from both the good and the bad of your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to calculate an accurate score. Should you not meet the criteria for getting a score, you might need to establish a credit history before you apply for a mortgage.

The Mortgage Exchange Service LLC can answer questions about credit reports and many others. Call us at 7032555810.

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