About Your Credit Score

Before lenders make the decision to give you a loan, they must know that you're willing and able to repay that mortgage. To figure out your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only take into account the information in your credit reports. They never take into account income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. 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, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score comes from the good and the bad in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate 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 credit to build an accurate score. If you don't meet the minimum criteria for getting a score, you may need to work on your credit history before you apply for a mortgage loan.

Custom Lending Group can answer your questions about credit reporting. Give us a call at 7072522700.