Credit Scoring

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

Fair Isaac and Company built the first FICO score to help lenders assess creditworthines. You can learn more on FICO here.

Credit scores only assess the info contained in your credit reports. They don't take into account your income, savings, down payment amount, or demographic factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when FICO scores were first invented as it is in the present day. Credit scoring was invented as a way to consider only that which was relevant to a borrower's likelihood to pay back a loan.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. 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 raise your score.

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 payment history ensures that there is sufficient information in your credit to build an accurate score. If you don't meet the criteria for getting a score, you may need to work on a credit history before you apply for a mortgage.

At Professional Mortgage Solutions Inc. (237990), we answer questions about Credit reports every day. Call us: 630-717-3600.