Credit Scoring

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to find out two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To assess your ability to repay, 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 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.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay without considering any other demographic factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments count against your score, but a record of paying on time will raise it.

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 report to assign a score. Should you not meet the minimum criteria for getting a credit score, you might need to establish a credit history before you apply for a mortgage.

At Price Mortgage Group LLC, we answer questions about Credit reports every day. Give us a call at 405-513-7700.