About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders must discover two things about you: whether you can repay the loan, and how committed you are to pay back the loan. To understand whether you can pay back the loan, they assess your income and debt ratio. To assess your willingness 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. The FICO score ranges from 350 (high risk) to 850 (low risk). You can find out more on FICO here.

Credit scores only consider the information in your credit reports. They don't take into account income, savings, amount of down payment, or factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's likelihood to pay back a loan.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated from the good and the bad in your credit history. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

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 sufficient information in your credit to calculate an accurate score. Some folks 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.

Carter Financial Solutions can answer questions about credit reports and many others. Call us: 866-840-8745 x2.

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