About Your Credit Score

Before lenders decide to lend you money, they have to know that you are willing and able to pay back that mortgage loan. To understand your ability to pay back the loan, they look at your income and debt ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). We've written more about FICO here.

Your credit score comes from your history of repayment. They do not take into account your income, savings, amount of down payment, or factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score considers positive and negative information in your credit report. Late payments count against you, but a record of paying on time will raise it.

Your credit 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 report to build an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

America's Money Source can answer questions about credit reports and many others. Give us a call at 4078987559.