About Your Credit Score

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders need to know two things about you: your ability to repay the loan, and how committed you are to repay the loan. To understand your ability to pay back the loan, they look at your income and debt ratio. In order to calculate your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are called FICO scores, which were developed by Fair Isaac & Company, Inc. 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 history of repayment. They do not consider income, savings, amount of down payment, or factors like sex ethnicity, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was invented as a way to take into account only what was relevant to a borrower's willingness to repay a loan.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad in your credit history. Late payments 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 at least six months of payment history. This history ensures that there is enough information in your credit to calculate an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should build up credit history before they apply.

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