About Your Credit Score
Before lenders make the decision to lend you money, they want to know that you are willing and able to repay that mortgage. To understand your ability to pay back the loan, they assess your income and debt ratio. In order to assess your willingness to pay back the loan, they consult your credit score.
The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more about FICO here.
Credit scores only take into account the information 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 only what was relevant to a borrower's likelihood to repay a loan.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score reflects both the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will raise 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 history ensures that there is sufficient information in your credit to generate a score. Some borrowers 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.
F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org) can answer your questions about credit reporting. Give us a call at 214-300-8756.