Credit Scoring

Before lenders make the decision to lend you money, they must know that you're willing and able to repay that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to pay back the mortgage loan, they look at your credit score.

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

Credit scores only take into account the info contained in your credit profile. They never consider your income, savings, down payment amount, or personal factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to pay back a loan.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score is calculated wtih both positive and negative information in your credit report. 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 six months. This history ensures that there is sufficient information in your report to calculate a score. Should you not meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage loan.

Todays Financing can answer questions about credit reports and many others. Give us a call: 2057831113.