About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must know two things about you: your ability to repay the loan, and if you will pay it back. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

The most widely 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). We've written a lot more about FICO here.

Credit scores only assess the info contained in your credit profile. They don't take into account income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess willingness to repay the loan without considering any other personal factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score is based on both the good and the bad of your credit history. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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

At Reliance Mortgage Service, Inc, we answer questions about Credit reports every day. Give us a call at 562 320-0510.

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