About Your Credit Score

Before they decide on the terms of your loan, lenders need to know two things about you: whether you can pay back the loan, and if you are willing to pay it back. To figure out your ability to repay, they look at your debt-to-income ratio. To calculate your willingness to repay the mortgage loan, they look at your credit score.

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

Your credit score is a 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 these scores were invented as it is in the present day. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to repay a loan.

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 information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 enough information in your credit to calculate a score. Should you not meet the criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage.

Tenby J. Dahman The Dahman Team can answer questions about credit reports and many others. Give us a call at 3038627760.