A Score that Really Matters: Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders want to find out two things about you: whether you can pay back the loan, and if you will pay it back. To understand whether you can repay, they assess your income and debt ratio. To calculate your willingness to pay back the loan, they consult your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthines. We've written a lot more about FICO here.

Credit scores only assess the information in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. "Profiling" was as dirty a word when FICO scores were first invented as it is in the present day. Credit scoring was developed to assess willingness to pay without considering other irrelevant factors.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scoring. Your score is calculated wtih positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your credit report should contain 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 report to build a score. Should you not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage loan.

At Acceptance Home Loans, we answer questions about Credit reports every day. Call us at 817-878-4220.