Credit Scoring

Before lenders decide to give you a loan, they need to know if you're willing and able to pay back that loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

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

Your credit score is a result of your history of repayment. They don't take into account income, savings, down payment amount, or factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was invented as a way to consider only that which was relevant to a borrower's willingness to repay a loan.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score comes from both the good and the bad in your credit report. Late payments count against your score, but a record of paying on time will raise it.

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

Contemporary Mortgage Services, Inc can answer your questions about credit reporting. Give us a call: 407-834-3377.

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