Credit Scoring

Before lenders make the decision to lend you money, they have to know that you are willing and able to repay that mortgage. To assess whether you can repay, they look at your income and debt ratio. To assess your willingness to repay the mortgage loan, they look at your credit score.

The most commonly used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more about FICO here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your credit report should 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 sufficient information in your credit to generate a score. Some folks don't have a long enough credit history to get a credit score. They may need to spend a little time building credit history before they apply.

PREMIERE MORTGAGE SERVICES, INC. can answer your questions about credit reporting. Call us: 978-422-2311.

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