A Score that Really Matters: The Credit Score

Before lenders decide to give you a loan, they need to know that you're willing and able to repay that mortgage loan. To figure out your ability to pay back the loan, 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 (very high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score comes from your repayment history. They never take into account your income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was invented as a way to consider solely what was relevant to a borrower's willingness to pay back a loan.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

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

Price Mortgage Group LLC can answer your questions about credit reporting. Call us: 405-513-7700.