A Score that Really Matters: Your Credit Score

Before lenders make the decision to lend you money, they have to know if you're willing and able to pay back that mortgage loan. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness to repay, they use 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). For details on FICO, read more here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess willingness to pay without considering other irrelevant factors.

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

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 history ensures that there is enough information in your report to generate an accurate score. If you don't meet the criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage.

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