About Your Credit Score

Before lenders make the decision to give you a loan, they have to know that you're willing and able to pay back that loan. To understand your ability to repay, they look at your income and debt ratio. To assess your willingness to repay the mortgage loan, they consult your credit score.

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

Credit scores only assess the information contained in your credit reports. They don't consider income or personal characteristics. 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 willingness 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 considered in credit scoring. Your score comes from both the good and the bad in your credit report. Late payments count against your score, 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 enough information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage loan.

Southwest Funding #841
Company NMLS # 303440 can answer your questions about credit reporting. Give us a call: 5122916100.