Credit Scoring

Before lenders decide to give you a loan, they need to know if you're willing and able to repay that loan. To assess your ability to repay, they look at your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written a lot more about FICO here.

Credit scores only take into account the information in your credit profile. They do not consider income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when FICO scores were invented as it is today. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's likelihood to pay back the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit report. Late payments count against you, but a record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is sufficient information in your report to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply.

Price Mortgage Group LLC can answer your questions about credit reporting. Give us a call at 405-513-7700.