Credit Scoring

Before deciding on what terms they will offer you a mortgage loan, lenders need to discover two things about you: your ability to repay the loan, and how committed you are to repay the loan. To assess your ability to pay back the loan, they assess your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult your credit score.

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

Credit scores only take into account the information contained in your credit profile. They don't consider income, savings, amount of down payment, or personal factors like gender, ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding other personal factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated wtih positive and negative items in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

For the agencies to calculate 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 sufficient information in your report to build a score. If you don't meet the criteria for getting a score, you might need to work on your credit history prior to applying for a mortgage.

At United Capital Mortgage, Inc., we answer questions about Credit reports every day. Give us a call: 2147187183.