Credit Scores

Before lenders decide to lend you money, they want to know that you're willing and able to pay back that mortgage loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To calculate your willingness to repay the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written more about FICO here.

Credit scores only assess the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to pay back the lender.

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

Your report should have 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. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building up a credit history before they apply for a loan.

Southwest Funding #841
Company NMLS # 303440 can answer questions about credit reports and many others. Call us at 5122916100.