Credit Scoring

Before lenders make the decision to lend you money, they have to know that you are willing and able to repay that mortgage loan. To assess whether you can repay, they look at your income and debt ratio. To calculate your willingness to repay the mortgage loan, they look at 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). For details on FICO, read more 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 envisioned as a way to consider solely what was relevant to a borrower's likelihood to pay back a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments lower your credit score, but consistently making future payments on time will improve your score.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to build a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on your credit history before you apply for a mortgage loan.

Foxfield Financial can answer your questions about credit reporting. Call us at 720-598-8300.

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