A Score that Really Matters: Your Credit Score
Before lenders decide to lend you money, they must know if you are willing and able to pay back that mortgage. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.
The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.
Credit scores only assess the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding other demographic factors.
Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score reflects the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.
For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient information in your credit to assign a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.
Amcap Premier Mortgage Ltd. can answer your questions about credit reporting. Give us a call: 281-797-0903.