Credit Scoring

Before lenders decide to lend you money, they must know that you're willing and able to pay back that mortgage loan. To assess your ability to repay, they look at your income and debt ratio. To assess your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. For details on FICO, read more here.

Your credit score comes from your history of repayment. They don't take into account your income, savings, down payment amount, or factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. 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 six months of payment history. This payment history ensures that there is sufficient information in your report to calculate an accurate score. If you don't meet the criteria for getting a credit score, you may need to establish your credit history prior to applying for a mortgage.

At Executive Lending Group, LLC, we answer questions about Credit reports every day. Call us at 8165258000.

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