About Your Credit Score
Before lenders decide to lend you money, they want to know if you are willing and able to repay that mortgage loan. To figure out your ability to pay back the loan, lenders assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.
The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.
Your credit score comes from your repayment history. They never consider income, savings, down payment amount, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when these scores were first invented as it is now. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's willingness to repay the lender.
Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score results from both positive and negative information in your credit report. Late payments count against your score, but a record of paying on time will raise it.
Your 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 report to build an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish a credit history prior to applying for a mortgage loan.
PREMIERE MORTGAGE SERVICES, INC. can answer your questions about credit reporting. Call us at 978-422-2311.