Credit Scores

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must find out two things about you: your ability to repay the loan, and if you are willing to pay it back. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthines. We've written more about FICO here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to repay the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score reflects both the good and the bad of your credit report. Late payments count against you, but a record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your report to assign an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply for a loan.

The Rate Kings Mortgage LLC can answer your questions about credit reporting. Give us a call: 6105723635.