Credit Scores

Before lenders decide to give you a loan, they want to know if you are willing and able to pay back that mortgage. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Your credit score comes from your repayment history. They don't take into account your income, savings, down payment amount, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was developed to assess willingness to repay the loan while specifically excluding any other personal factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 build a score. If you don't meet the criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

Foxfield Financial can answer questions about credit reports and many others. Call us: 7205988300.