Credit Scoring

Before they decide on the terms of your loan, lenders must discover two things about you: your ability to pay back 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 the mortgage loan, they look at your credit score.

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

Credit scores only assess the information in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess willingness to pay without considering any other personal factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score considers both positive and negative items in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit 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 sufficient information in your credit to build an accurate score. Some people don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

Amcap Premier Mortgage Ltd. can answer questions about credit reports and many others. Give us a call: 281-797-0903.

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