Credit Scores

Before they decide on the terms of your mortgage loan, lenders must discover two things about you: whether you can repay the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to pay back the loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more about FICO here.

Credit scores only take into account the information contained in your credit reports. They never consider your income, savings, amount of down payment, or personal factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is now. Credit scoring was developed to assess willingness to repay the loan without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score comes from the good and the bad of your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

To get a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to build a score. Should you not meet the criteria for getting a credit score, you might need to establish your credit history prior to applying for a mortgage loan.

Tenby J. Dahman The Dahman Team can answer your questions about credit reporting. Give us a call: 3038627760.