Credit Scores

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must discover two things about you: whether you can repay the loan, and if you will pay it back. To understand your ability to pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider 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 dirty a word when FICO scores were invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering other demographic factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score results from both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

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 generate a score. Should you not meet the criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage loan.

Executive Lending Group, LLC can answer your questions about credit reporting. Call us at 8165258000.