Credit Scores

Before lenders make the decision to lend you money, they need to know that you're willing and able to pay back that mortgage loan. To assess your ability to pay back the loan, they look at 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 called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only assess the info contained in your credit profile. They don't take into account income, savings, down payment amount, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess willingness to pay while specifically excluding any other personal factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score is calculated from both the good and the bad of your credit history. Late payments count against your score, but a consistent record of paying on time will improve it.

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 payment history ensures that there is sufficient information in your report to build a score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

AmeriBest Mortgage can answer questions about credit reports and many others. Give us a call: 3217777277.