Credit Scoring

Before lenders make the decision to give you a loan, they must know if you are willing and able to pay back that mortgage. To assess your ability to pay back the loan, they assess your debt-to-income ratio. In order to calculate your willingness to repay the mortgage loan, they consult your credit score.

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

Credit scores only assess the info contained in your credit reports. They do not take into account income, savings, down payment amount, or personal factors like sex race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were invented as it is in the present day. Credit scoring was envisioned as a way to consider solely what 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 based on both the good and the bad of your credit report. Late payments count against you, but a record of paying on time will raise it.

To get a credit score, you must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to generate an accurate score. If you don't meet the minimum criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage loan.

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

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