Credit Scores

Before they decide on the terms of your mortgage loan, lenders want to discover two things about you: your ability to repay the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Credit scores only consider the info in your credit reports. They never take into account income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is now. Credit scoring was envisioned as a way to take into account solely that which was relevant to a borrower's willingness to repay a loan.

Past delinquencies, 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 is calculated wtih both positive and negative information in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

For the agencies to calculate a credit score, borrowers 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 report to calculate an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

Foxfield Financial can answer questions about credit reports and many others. Call us at 720-598-8300.

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