About Your Credit Score

Before lenders make the decision to lend you money, they want to know that you're willing and able to pay back that loan. To figure out your ability to repay, they assess your debt-to-income ratio. To calculate your willingness to pay back the loan, they consult your credit score.

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

Credit scores only take into account the information contained in your credit profile. They never take into account income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was developed to assess willingness to pay while specifically excluding any other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score considers positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

For the agencies to calculate 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 report to generate an accurate score. Should you not meet the minimum criteria for getting a score, you may need to establish your credit history before you apply for a mortgage loan.

At Bob Rutledge Mortgage, we answer questions about Credit reports every day. Call us: 3149139678.