Credit Scores

Before deciding on what terms they will offer you a mortgage loan, lenders must discover two things about you: your ability to repay the loan, and your willingness to pay back the loan. To understand your ability to 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 Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on FICO here.

Credit scores only take into account the info in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other personal factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih both positive and negative information in your credit report. Late payments will lower your score, but consistently making future payments on time will raise your score.

For the agencies to calculate a credit score, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your credit to build a score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply for a loan.

Carter Financial Solutions can answer your questions about credit reporting. Call us: 8668408745.

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Carter Financial Solutions

2291 W. March Ln Suite A100
Stockton, CA 95207