Your Credit Score: What it means
Before lenders decide to give you a loan, they must know that you are willing and able to repay that mortgage. To figure out your ability to pay back the loan, they look at your debt-to-income ratio. To calculate your willingness to pay back the mortgage loan, they consult your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score is a result of your repayment history. They do not consider income, savings, down payment amount, or personal factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding other irrelevant factors.
Past delinquencies, derogatory 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 results from both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
Your 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 payment history ensures that there is enough information in your credit to calculate a score. If you don't meet the minimum criteria for getting a credit score, you may need to establish a credit history prior to applying for a mortgage loan.
At United Capital Mortgage, Inc., we answer questions about Credit reports every day. Call us at 2147187183.