A Score that Really Matters: The Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders need to find out two things about you: whether you can pay back the loan, and your willingness to pay back the loan. To assess your ability to repay, they look at your income and debt ratio. To assess your willingness to pay back the mortgage loan, they look at your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's likelihood to repay a loan.

Your current debt level, 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 credit report must contain 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. If you don't meet the minimum criteria for getting a score, you may need to establish your credit history before you apply for a mortgage.

At Foxfield Financial, we answer questions about Credit reports every day. Give us a call: 720-598-8300.