A Score that Really Matters: The Credit Score

Before they decide on the terms of your mortgage loan, lenders need to find out two things about you: your ability to pay back the loan, and if you will pay it back. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to pay back the loan, they look at your credit score.

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

Your credit score comes from your history of repayment. They never consider your income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to pay back a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad of your credit history. Late payments lower your credit score, but consistently making future payments on time will improve your score.

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 sufficient information in your report to calculate an accurate score. If you don't meet the criteria for getting a score, you might need to work on a credit history before you apply for a mortgage.

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