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: your ability to repay the loan, and if you will pay it back. To assess whether you can pay back the loan, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. You can learn more about FICO here.

Credit scores only consider the info contained in your credit reports. They do not consider income, savings, amount of down payment, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score results from positive and negative items in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise 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 payment history ensures that there is enough information in your report to generate a score. Some folks don't have a long enough credit history to get a credit score. They may need to spend some time building a credit history before they apply.

Chattahoochee Residential Mortgage, LLC can answer questions about credit reports and many others. Give us a call at 4702755627.