Credit Scoring

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders need to know two things about you: your ability to pay back the loan, and if you will pay it back. To figure out your ability to repay, lenders look at your debt-to-income ratio. In order to calculate your willingness to repay the loan, they consult your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthines. You can find out more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income, savings, amount of down payment, or demographic factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to consider solely that which was relevant to a borrower's likelihood to pay back the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score results from positive and negative items in your credit report. Late payments lower your credit 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 a payment history of six months. This history ensures that there is sufficient information in your report to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building a credit history before they apply.

1st Credential Mortgage Inc can answer questions about credit reports and many others. Give us a call: (281) 778-0805.

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