Credit Scores

Before lenders decide to lend you money, they have to know if you're 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 repay the mortgage loan, they consult your credit score.

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

Credit scores only consider the info contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to consider solely what was relevant to a borrower's likelihood to repay the lender.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score is calculated from both the good and the bad of your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to calculate a score. If you don't meet the criteria for getting a credit score, you might need to establish your credit history before you apply for a mortgage.

PREMIERE MORTGAGE SERVICES, INC. can answer questions about credit reports and many others. Give us a call at 978-422-2311.

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