A Score that Really Matters: The Credit Score

Before lenders make the decision to give you a loan, they need to know that you are willing and able to repay that mortgage loan. To understand whether you can repay, they assess your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.

The most widely used credit scores are called 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.

Credit scores only consider the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was invented as a way to consider only that which was relevant to a borrower's likelihood to pay back a loan.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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

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

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