About Your Credit Score

Before lenders decide to lend you money, they must know if you are willing and able to pay back that mortgage loan. 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 widely 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). You can find out more about FICO here.

Credit scores only assess the info in your credit reports. They never consider income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess willingness to pay while specifically excluding other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments count against your score, 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 report to calculate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

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