Credit Scores

Before lenders decide to give you a loan, they want to know that you are willing and able to pay back that mortgage loan. To understand your ability to repay, they assess your income and debt ratio. In order to calculate your willingness to pay back the loan, they consult your credit score.

The most commonly 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). You can find out more about FICO here.

Your credit score comes from your history of repayment. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were first invented as it is now. Credit scoring was envisioned as a way to consider only that which was relevant to a borrower's likelihood to repay the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score considers 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 at least six months of payment history. This history ensures that there is sufficient information in your credit to generate an accurate score. Should you not meet the criteria for getting a credit score, you may need to work on your credit history prior to applying for a mortgage loan.

At Greystone Loans, Inc., we answer questions about Credit reports every day. Give us a call at 9094671090.