Credit Scores

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to find out two things about you: whether you can repay the loan, and if you are willing to pay it back. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more about FICO here.

Your credit score comes from 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 take into account only what was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information 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.

Your report should have 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 history ensures that there is enough information in your report to calculate an accurate score. Should you not meet the criteria for getting a score, you might need to work on your credit history prior to applying for a mortgage loan.

Custom Lending Group can answer questions about credit reports and many others. Call us at 7072522700.


Custom Lending Group

NMLS#845079
BRE#00944064