Credit Scores

Before lenders make the decision to lend you money, they must know that you are willing and able to repay that mortgage. To assess your ability to repay, lenders look at your debt-to-income ratio. In order to assess your willingness to repay the loan, they consult your credit score.

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

Credit scores only assess the info in your credit reports. They do not take into account income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is today. Credit scoring was developed as a way to consider solely that which was relevant to a borrower's likelihood to repay the lender.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score results from 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, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is sufficient information in your credit to assign an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on a credit history prior to applying for a mortgage.

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

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