Credit Scoring

Before lenders decide to give you a loan, they have to know that you are willing and able to pay back that mortgage. To assess whether you can repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more about FICO 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 like these. "Profiling" was as bad a word when these scores were invented as it is today. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This payment history ensures that there is sufficient information in your credit to calculate a score. Should you not meet the minimum criteria for getting a credit score, you may need to work on a credit history before you apply for a mortgage loan.

Price Mortgage Group LLC can answer questions about credit reports and many others. Give us a call at 405-513-7700.

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