Credit Scores

Before lenders decide to lend you money, they want to know if you're willing and able to pay back that mortgage loan. To figure out your ability to repay, they look at your debt-to-income ratio. To assess your willingness to repay the loan, they consult your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on FICO here.

Credit scores only take into account the information contained in your credit reports. They never consider your income, savings, down payment amount, or personal factors like sex 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 first invented as it is now. Credit scoring was developed to assess willingness to repay the loan without considering other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative information in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

Your 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 history ensures that there is enough information in your report to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

Reliance Mortgage Service, Inc can answer your questions about credit reporting. Give us a call: 562 320-0510.

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