Credit Scoring

Before deciding on what terms they will offer you a mortgage loan, lenders must know two things about you: your ability to repay the loan, and if you are willing to pay it back. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

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

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other demographic factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score is calculated from both the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to generate an accurate score. Should you not meet the criteria for getting a credit score, you may need to work on your credit history before you apply for a mortgage.

At Custom Lending Group, we answer questions about Credit reports every day. Give us a call at 7072522700.