A Score that Really Matters: Your Credit Score

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

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written more on FICO here.

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's likelihood to pay back the lender.

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

Your 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 payment history ensures that there is enough information in your report to calculate an accurate score. Some folks don't have a long enough credit history to get a credit score. They should build up a credit history before they apply.

At First Capital Mortgage, we answer questions about Credit reports every day. Call us: 2815651246.