Credit Scores

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders want to know two things about you: whether you can repay the loan, and your willingness to repay the loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is based on both the good and the bad in your credit history. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve 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 history ensures that there is sufficient information in your report to generate an accurate score. Should you not meet the minimum criteria for getting a score, you may need to establish your credit history prior to applying for a mortgage.

At Carter Financial Solutions, we answer questions about Credit reports every day. Call us: 866-840-8745 x2.

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