A Score that Really Matters: Your Credit Score

Before lenders make the decision to give you a loan, they must know if you're willing and able to pay back that loan. To assess whether you can repay, they look at your income and debt ratio. In order to calculate 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. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only take into account the info contained in your credit profile. They don't take into account income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to pay without considering any other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad of your credit history. Late payments lower your credit score, but consistently making future payments on time will improve your score.

Your credit 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 enough information in your report to build a score. Should you not meet the criteria for getting a score, you may need to establish a credit history before you apply for a mortgage loan.

Middleton Website Test Services can answer your questions about credit reporting. Give us a call: 4058873713.