A Score that Really Matters: Your Credit Score

Before lenders make the decision to lend you money, they want to know that you are willing and able to pay back that mortgage. To assess your ability to repay, lenders assess your debt-to-income ratio. To assess how willing you are to repay, they use 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 (high risk) to 850 (low risk). We've written a lot more about FICO here.

Your credit score comes from your history of repayment. They do not take into account your income, savings, amount of down payment, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were invented as it is now. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's likelihood to repay the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your report must 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 credit to build a score. Should you not meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage loan.

CHASE MORTGAGE, Inc. #317430 can answer questions about credit reports and many others. Give us a call at 4357556622.