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: your ability to repay the loan, and how committed you are to pay back the loan. To assess whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use 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 (very high risk) to 850 (low risk). We've written more about FICO here.

Your credit score comes from your repayment history. They do not consider income, savings, down payment amount, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to repay the lender.

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 of your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

To get a credit score, you must have an active credit account with a payment history of at least six months. This payment history ensures that there is enough information in your credit to assign a 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 credit history before they apply.

Executive Lending Group, LLC can answer questions about credit reports and many others. Give us a call at 8165258000.

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