A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders need to know two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To assess your ability to repay, they assess your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.

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

Credit scores only assess the info in your credit reports. They don't consider your income, savings, amount of down payment, or factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was invented as a way to take into account solely what was relevant to a borrower's likelihood to repay the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score reflects the good and the bad in your credit report. Late payments count against you, but a record of paying on time will raise it.

Your 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 history ensures that there is sufficient information in your credit to build a score. If you don't meet the minimum criteria for getting a score, you might need to establish a credit history before you apply for a mortgage.

The Rate Kings Mortgage LLC can answer questions about credit reports and many others. Call us at 6105723635.