About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must find out two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To assess your ability to repay, they assess your debt-to-income ratio. To assess your willingness to repay, they use 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). You can learn more about FICO here.

Your credit score comes from your history of repayment. 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 invented as it is today. Credit scoring was developed as a way to consider solely that which was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score considers both positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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

At Southwest Funding #841
Company NMLS # 303440, we answer questions about Credit reports every day. Give us a call: 5122916100.