Credit Scores

Before lenders decide to give you a loan, they have to know if you're willing and able to pay back that loan. To understand your ability to repay, they assess your income and debt ratio. To assess your willingness 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. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only consider the information in your credit profile. They don't consider income, savings, down payment amount, or factors like gender, ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative items in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

Your 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 history ensures that there is enough information in your report to assign an accurate 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 loan.

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