Credit Scores

Before they decide on the terms of your mortgage loan, lenders need to find out two things about you: your ability to repay the loan, and your willingness to repay the loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. You can find out more about FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were invented as it is in the present day. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from both positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

Your credit report should have 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 payment history ensures that there is enough information in your credit to assign an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend some time building up a credit history before they apply for a loan.

The Rate Kings Mortgage LLC can answer your questions about credit reporting. Give us a call at 8009468194.