Credit Scoring

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to know two things about you: your ability to repay the loan, and if you are willing to pay it back. To assess whether you can pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more about FICO here.

Your credit score is a result of your history of repayment. They don't take into account your income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other irrelevant factors.

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

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

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