Credit Scoring

Before lenders decide to lend you money, they want to know that you're willing and able to repay 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 were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more about FICO here.

Credit scores only take into account the info contained in your credit reports. They never consider income, savings, down payment amount, or factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to repay a loan.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score is based on the good and the bad in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply for a loan.

1st Credential Mortgage Inc can answer your questions about credit reporting. Call us: (281) 778-0805.