Credit Scores

Before they decide on the terms of your mortgage loan, lenders want to know two things about you: whether you can pay back the loan, and how committed you are to pay back the loan. To assess your ability to repay, lenders assess your debt-to-income ratio. In order to assess your willingness to repay the loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score is a direct result of your repayment history. They never take into account your income, savings, amount of down payment, or demographic factors like sex ethnicity, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score considers both positive and negative information 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 sufficient information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage.

Financial Edge Mortgage Corp. can answer your questions about credit reporting. Give us a call: 425-508-9988.