Credit Scores

Before deciding on what terms they will offer you a loan, lenders need to discover two things about you: whether you can pay back the loan, and your willingness to pay back the loan. To assess your ability to repay, they look at your income and debt ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.

The most widely used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed to assess willingness to pay without considering any other personal factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score considers positive and negative information in your credit report. Late payments count against you, but a record of paying on time will improve it.

For the agencies to calculate a credit score, borrowers must have an active credit account with a payment history of at least six months. This payment history ensures that there is enough information in your report to build an accurate score. Should you not meet the criteria for getting a score, you might need to establish your credit history prior to applying for a mortgage loan.

At Carter Financial Solutions, we answer questions about Credit reports every day. Give us a call: 8668408745.

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Carter Financial Solutions

2291 W. March Ln Suite A100
Stockton, CA 95207