A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a loan, lenders need to discover two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To understand your ability to pay back the loan, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company calculated the first FICO score to assess creditworthines. We've written a lot more about FICO here.

Credit scores only take into account the information contained in your credit reports. They never take into account income, savings, down payment amount, or personal factors like sex race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay without considering any other personal factors.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score is calculated from the good and the bad in your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

To get a credit score, you 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 generate a score. Should you not meet the minimum criteria for getting a score, you might need to work on a credit history before you apply for a mortgage loan.

Equity Edge Mortgage, Inc. can answer questions about credit reports and many others. Give us a call at 719-425-2226.