A Score that Really Matters: Your Credit Score

Before they decide on the terms of your mortgage loan, 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 your ability to repay, they assess your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more about FICO here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess willingness to repay the loan while specifically excluding any other demographic factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score is based on the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

Your report must contain 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 sufficient information in your report to calculate an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to work on your credit history before you apply for a mortgage.

Foxfield Financial can answer questions about credit reports and many others. Give us a call: 7205988300.