Credit Scores

Before lenders make the decision to lend you money, they must know that you are willing and able to pay back that mortgage. To understand your ability to pay back the loan, 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 called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only take into account the info contained in your credit reports. They never take into account income, savings, amount of down payment, or factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. 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 raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your report to build an accurate score. Should you not meet the criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.

American Mortgage Advisers, Inc can answer your questions about credit reporting. Call us: 2147390569.