Credit Scoring

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders need to know two things about you: whether you can pay back the loan, and if you are willing to pay it back. To assess your ability to repay, they assess your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out 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. 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 personal factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad in your credit report. Late payments count against your score, but a consistent record of paying on time will raise it.

Your credit 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 assign an accurate score. Some folks 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.

AmeriBest Mortgage can answer your questions about credit reporting. Call us at 3217777277.