A Score that Really Matters: The Credit Score

Before they decide on the terms of your mortgage loan, lenders must discover two things about you: whether you can repay the loan, and if you will pay it back. To assess whether you can pay back the loan, they assess your income and debt ratio. In order to assess your willingness to repay the loan, they look at 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). We've written more about FICO here.

Credit scores only consider the information in your credit profile. 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 a borrower's willingness to pay without considering any other personal factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

To get 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 sufficient information in your report to calculate a score. Some people don't have a long enough credit history to get a credit score. They should spend some time building up a credit history before they apply.

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