Your Credit Score: What it means
Before lenders make the decision to lend you money, they have to know if you are willing and able to repay that mortgage loan. To assess your ability to repay, they assess your income and debt ratio. In order to calculate your willingness to repay the mortgage loan, they consult your credit score.
The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a result of your repayment history. They never take into account your income, savings, down payment amount, or demographic factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account only that which was relevant to a borrower's likelihood to pay back a loan.
Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects both the good and the bad in your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.
Your credit report must 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 enough information in your credit to assign a score. Should you not meet the minimum criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage loan.
Price Mortgage Group LLC can answer your questions about credit reporting. Give us a call at 405-513-7700.