Credit Scoring

Before lenders make the decision to give you a loan, they need to know if you're willing and able to repay that loan. To assess your ability to pay back the loan, lenders assess your debt-to-income ratio. In order to assess your willingness to pay back the mortgage loan, they look at 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 (very high risk) to 850 (low risk). We've written more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess willingness to repay the loan while specifically excluding other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is based on the good and the bad of your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.

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

At 1st Credential Mortgage Inc, we answer questions about Credit reports every day. Call us: (281) 778-0805.

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