About Your Credit Score

Before lenders make the decision to give you a loan, they have to know if you are willing and able to pay back that loan. To understand whether you can pay back the loan, they assess your income and debt ratio. In order to assess your willingness to pay back the mortgage loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can learn more about FICO here.

Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other personal factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score considers both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

Your report should 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 calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend some time building credit history before they apply for a loan.

Financial Edge Mortgage Corp. can answer questions about credit reports and many others. Give us a call at 425-508-9988.

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