Credit Scoring

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

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. You can learn more about FICO here.

Credit scores only assess the info contained in your credit profile. They never consider your income, savings, down payment amount, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to repay a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad in your credit report. Late payments will lower your score, but consistently making future payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to generate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply for a loan.

At F&T Mortgage, Inc. NMLS # 168839 (www.nmlsconsumeraccess.org), we answer questions about Credit reports every day. Give us a call at 214-300-8756.