About Your Credit Score
Before deciding on what terms they will offer you a mortgage loan, lenders need to discover two things about you: your ability to pay back the loan, and your willingness to repay the loan. To understand whether you can pay back the loan, they look at your income and debt ratio. To assess how willing you are to repay, they use 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 (very high risk) to 850 (low risk). We've written more about FICO here.
Your credit score is a result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was developed to assess a borrower's willingness to pay without considering other personal 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 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. Some folks don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply.
Greystone Loans, Inc. can answer questions about credit reports and many others. Call us: 9094671090.