About Your Credit Score
Before lenders decide to give you a loan, they must know that you are willing and able to repay that mortgage. To assess whether you can repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.
The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more on FICO here.
Credit scores only take into account the info contained in your credit reports. They don't consider income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was developed as a way to consider 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 other factors are considered. Your score results from positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
To get a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is sufficient information in your report to assign a score. If you don't meet the criteria for getting a score, you might need to work on a credit history prior to applying for a mortgage loan.
America's Money Source can answer your questions about credit reporting. Call us: (407) 898-7559.
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