About Your Credit Score

Before lenders decide to give you a loan, they want to know if you are willing and able to pay back that mortgage loan. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

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

Credit scores only assess the info in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's likelihood to repay a loan.

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 information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This payment history ensures that there is sufficient 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 build up a credit history before they apply for a loan.

Bob Rutledge Mortgage can answer your questions about credit reporting. Give us a call: 3149139678.