Credit Scoring

Before lenders make the decision to lend you money, they need to know if you are willing and able to pay back that mortgage. To figure out your ability to repay, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

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

Your credit score is a direct result of your repayment history. They do not take into account your income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's willingness to pay back a loan.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score is based on both the good and the bad of your credit history. Late payments count against you, but a consistent record of paying on time will improve it.

To get a credit score, you must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your report to generate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend some time building up credit history before they apply.

At American Mortgage Advisers, Inc, we answer questions about Credit reports every day. Call us at 2147390569.