Credit Scores

Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that loan. To assess whether you can repay, they assess your income and debt ratio. To assess how willing you are 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 about FICO here.

Your credit score comes from your history of repayment. They don't take into account income, savings, down payment amount, or demographic factors like sex race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad of your credit report. Late payments count against you, but a record of paying on time will raise it.

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 report to calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

MortgageZ LLC can answer your questions about credit reporting. Call us at 8557558700.