Credit Scoring

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

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. 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 what was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative information in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

Your report should 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 enough information in your report to calculate a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.

At AmeriBest Mortgage, we answer questions about Credit reports every day. Call us: 3217777277.