A Score that Really Matters: The Credit Score

Before lenders make the decision to give you a loan, they need to know that you're willing and able to pay back that mortgage loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

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

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is now. Credit scoring was developed as a way to consider only that which was relevant to a borrower's willingness to repay the lender.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score comes from both the good and the bad of your credit report. Late payments count against you, but a record of paying on time will raise it.

To get a credit score, you must have an active credit account with six months of payment history. This history ensures that there is sufficient information in your report to calculate an accurate score. Should you not meet the criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.

At Price Mortgage Group LLC, we answer questions about Credit reports every day. Give us a call at 405-513-7700.