A Score that Really Matters: The Credit Score

Before lenders decide to lend you money, they have to know if you are willing and able to repay that mortgage loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.

Credit scores only consider the information in your credit profile. They never take into account your income, savings, down payment amount, or demographic factors like sex race, 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 invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay without considering any other demographic factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your credit report should 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 payment history ensures that there is enough information in your credit to calculate an accurate score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage.

At The Rate Kings Mortgage LLC, we answer questions about Credit reports every day. Give us a call at 6105723635.