Credit Scores

Before deciding on what terms they will offer you a loan, lenders need to find out two things about you: your ability to repay the loan, and your willingness to repay the loan. To assess whether you can repay, they look at your income and debt ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.

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

Credit scores only assess the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to take into account solely what was relevant to a borrower's willingness to pay back a loan.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad of your credit history. Late payments lower your score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is enough information in your credit to generate a score. Should you not meet the criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage loan.

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