A Score that Really Matters: The Credit Score

Before lenders make the decision to lend you money, they need to know that you're willing and able to repay that mortgage. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company formulated the first FICO score to help lenders assess creditworthines. We've written more about FICO here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to take into account only what was relevant to a borrower's willingness to repay the lender.

Deliquencies, derogatory payment behavior, debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is based on both the good and the bad in your credit history. Late payments count against you, 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 six months. This payment history ensures that there is enough information in your report to calculate a score. If you don't meet the criteria for getting a score, you may need to work on your credit history prior to applying for a mortgage.

Executive Lending Group can answer questions about credit reports and many others. Give us a call at 4056158543.