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 know two things about you: your ability to repay the loan, and how committed you are to repay the loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. We've written more on FICO here.

Your credit score comes from your repayment history. They don't take into account your income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's likelihood to repay a loan.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scoring. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against your score, 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 history ensures that there is enough information in your credit to build an accurate score. Should you not meet the criteria for getting a score, you may need to establish your credit history before you apply for a mortgage loan.

At US Financial Mortgage Group, we answer questions about Credit reports every day. Give us a call at 5596747669.