Credit Scores

Before lenders make the decision to lend you money, they want to know if you're willing and able to pay back that mortgage loan. To assess your ability to repay, they look at 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 FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written a lot more on FICO here.

Credit scores only take into account the information contained in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's willingness to pay back the lender.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise your score.

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 payment history ensures that there is sufficient information in your credit to assign an accurate score. Should you not meet the minimum criteria for getting a credit score, you might need to work on a credit history before you apply for a mortgage.

Carter Financial Solutions can answer your questions about credit reporting. Call us at 866-840-8745 x2.

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