Credit Scoring

Before they decide on the terms of your loan, lenders need to find out two things about you: your ability to pay back the loan, and how committed you are to pay back the loan. To assess your ability to repay, they assess your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.

The most commonly used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only take into account the information contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to pay without considering other demographic factors.

Deliquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score is based on both the good and the bad of your credit report. Late payments lower your score, but consistently making future payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to spend a little time building credit history before they apply.

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

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Carter Financial Solutions

1810 Pacific Ave
Stockton, CA 95204