Credit Scoring

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to discover two things about you: your ability to repay the loan, and if you will pay it back. To understand whether you can repay, they look at your income and debt ratio. In order to assess your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. For details on FICO, read more here.

Your credit score is a result of your repayment history. They do not consider your income, savings, down payment amount, or personal factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to repay a loan.

Past delinquencies, 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 results from both positive and negative items in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

To get a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is enough information in your report to calculate a score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.

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

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