What Lenders Are Looking For
Before deciding on the terms of your mortgage loan, lenders need to understand two key things about you: your ability to repay the loan, and your willingness to repay the loan.
Ability to Repay
Lenders assess your income and debt ratio — your Debt-to-Income (DTI) ratio — to determine whether you have the financial capacity to make your mortgage payments. Learn more about DTI ratios.
Willingness to Repay
Lenders use your credit score to evaluate your track record of paying back what you owe. This is where your FICO score comes in — it tells the story of how you've managed credit in the past.
What is a FICO Score?
The most widely used credit scores are called FICO scores, developed by Fair Isaac & Company, Inc. FICO scores range from 350 (very high risk) to 850 (low risk) and are the standard measure used by mortgage lenders across the country.
Importantly, FICO scores only consider the information in your credit profile. They do not take into account your income, savings, down payment amount, or demographic factors such as sex, race, nationality, or marital status. Credit scoring was specifically designed to assess willingness to repay while excluding all demographic factors.
Very High Risk
350–579
Fair
580–669
Good
670–739
Very Good
740–799
Low Risk
800–850
What Affects Your FICO Score?
Your score is calculated using both positive and negative information in your credit report:
Payment History — Late payments count against you, but a consistent record of paying on time will improve your score. This is the single most important factor.
Current Debt Load — How much you currently owe across all accounts relative to your available credit limits.
Length of Credit History — Longer credit histories generally result in higher scores, as they provide more data on your repayment behavior.
Types of Credit Used — A healthy mix of credit cards, installment loans, and other account types can positively impact your score.
New Credit Inquiries — Applying for multiple new credit accounts in a short period can temporarily lower your score.
Minimum Requirements: To generate a FICO score, your credit report must have at least one account open for 6 months or more, and at least one account updated in the past 6 months. If you don't meet these requirements, you may need to build your credit history before applying for a mortgage.
Get Your Free Credit Report
By federal law, you are entitled to a free credit report from each of the three major bureaus every year. Reviewing your report before applying for a mortgage is one of the smartest steps you can take.
For information on how to get your free annual credit report, visit our page: Getting Your Credit Report.