Credit Scores

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 whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.

Credit scores only consider the info contained in your credit reports. They never consider your income, savings, amount of down payment, or demographic factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's likelihood to pay back a loan.

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

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

At America's Money Source, we answer questions about Credit reports every day. Give us a call at 4078987559.