Credit Scoring

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Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders want to find out two things about you: your ability to repay the loan, and how committed you are to repay the loan. To figure out your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthiness. We've written a lot more about FICO here.

Your credit score is a result of your history of repayment. They never consider income, savings, down payment amount, or personal factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to pay while specifically excluding any other irrelevant factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers 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.

Your 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. If you don't meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage.

Mortgage Solution Providers LLC can answer questions about credit reports and many others. Call us at 813.205.9007.