A Score that Really Matters: Your Credit Score

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

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a result of your repayment history. They don't consider your income, savings, down payment amount, or factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was invented as a way to consider solely that which was relevant to a borrower's willingness to repay the lender.

Past delinquencies, 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 considers positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your credit report must contain 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 sufficient information in your credit to build a score. If you don't meet the criteria for getting a credit score, you might need to work on your credit history before you apply for a mortgage.

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