Credit Scoring

Before lenders decide to give you a loan, they have to know if you're willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company built 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 reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative information in your credit report. Late payments lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit 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 payment history ensures that there is sufficient information in your report to generate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building a credit history before they apply.

Financial Edge Mortgage Corp. can answer your questions about credit reporting. Call us at 425-508-9988.

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