Credit Scoring

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must discover two things about you: your ability to repay the loan, and if you are willing to pay it back. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company calculated the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Credit scores only take into account the info contained in your credit profile. They do not consider income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on the good and the bad in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to calculate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend a little time building up credit history before they apply.

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