About Your Credit Score

Before lenders make the decision to give you a loan, they must know if you are willing and able to repay that mortgage. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more about FICO here.

Credit scores only consider the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's willingness to repay the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative items in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

For the agencies to calculate 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 generate a score. Should you not meet the minimum criteria for getting a score, you may need to work on 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.