Credit Scores

Before deciding on what terms they will offer you a mortgage loan, lenders want to know two things about you: your ability to repay the loan, and if you are willing to pay it back. To understand whether you can repay, they assess your income and debt ratio. In order to assess your willingness to pay back the mortgage loan, they look at your credit score.

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

Credit scores only assess the info contained in your credit profile. They don't take into account income, savings, down payment amount, or factors like gender, race, national origin or marital status. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other irrelevant factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all calculated into credit scoring. Your score is calculated wtih both positive and negative items in your credit report. Late payments will lower your credit score, but consistently making future payments on time will raise 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 payment history ensures that there is sufficient information in your credit to calculate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend some time building credit history before they apply for a loan.

Greystone Loans, Inc. can answer your questions about credit reporting. Give us a call at 9094671090.