Credit Scoring

Before lenders decide to lend you money, they have to know that you are willing and able to repay that mortgage. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

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

Your credit score is a result of your repayment history. They do not consider your income, savings, down payment amount, or personal factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other personal factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score comes from both the good and the bad of your credit report. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

Your credit 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 payment history ensures that there is sufficient information in your report to assign an accurate score. If you don't meet the criteria for getting a credit score, you may need to establish your credit history before you apply for a mortgage.

At Southwest Funding #841
Company NMLS # 303440, we answer questions about Credit reports every day. Call us at 5122916100.