About Your Credit Score

Before lenders decide to give you a loan, they must know that you are willing and able to repay that mortgage loan. To assess your ability to repay, they assess your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more on FICO here.

Credit scores only consider the information in your credit reports. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was invented as a way to take into account solely that which was relevant to a borrower's likelihood to pay back a loan.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scores. Your score reflects the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is enough information in your credit to assign 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 a credit history before they apply.

At Contemporary Mortgage Services, Inc, we answer questions about Credit reports every day. Call us at 407-834-3377.

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