Credit Scoring

Before lenders make the decision to give you a loan, they must know if you're willing and able to repay that mortgage. To assess your ability to pay back the loan, they assess 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 called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more on FICO here.

Your credit score comes from your repayment history. They never consider your income, savings, down payment amount, or personal factors like gender, ethnicity, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other demographic factors.

Deliquencies, 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 is based on both the good and the bad of your credit report. Late payments count against you, but a record of paying on time will raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a credit score, you may need to work on your credit history before you apply for a mortgage.

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

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