About Your Credit Score

Before lenders make the decision to lend you money, they have to know if you're willing and able to pay back that mortgage. To assess your ability to repay, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written more about FICO here.

Credit scores only consider the information in your credit reports. 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 invented as it is today. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering any other irrelevant factors.

Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

For the agencies to calculate a credit score, borrowers must have an active credit account with six months of payment history. This history ensures that there is enough information in your report to build a score. Should you not meet the criteria for getting a score, you might need to work on a credit history before you apply for a mortgage loan.

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