About Your Credit Score

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

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.

Credit scores only consider the info in your credit profile. They don't take into account income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan 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 is calculated from 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.

Your credit 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 generate a score. Should you not meet the criteria for getting a score, you may need to establish a credit history before you apply for a mortgage.

Ashok Lakshmanan can answer questions about credit reports and many others. Call us: 6307173600.