Credit Scores

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to know two things about you: whether you can pay back the loan, and if you will pay it back. To understand your ability to pay back the loan, they assess your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthines. We've written more on FICO here.

Your credit score is a direct result of your history of repayment. They never consider your income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

To get a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to generate a score. If you don't meet the criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage.

Bob Rutledge Mortgage can answer questions about credit reports and many others. Give us a call: 3149139678.