A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they have to know if you are willing and able to repay that mortgage. To understand whether you can pay back the loan, they assess your income and debt ratio. To calculate your willingness to repay the loan, they look at your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only take into account the info in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to consider only what was relevant to a borrower's willingness to repay the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score reflects both the good and the bad in your credit history. Late payments count against your score, but a consistent record of paying on time will raise it.

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

Affinity Mortgage Brokers can answer your questions about credit reporting. Give us a call at 719-425-2226.


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