A Score that Really Matters: Your Credit Score
Before they decide on the terms of your loan, lenders need to know two things about you: your ability to pay back the loan, and if you will pay it back. To assess whether you can pay back the loan, they look at your income and debt ratio. To calculate your willingness to pay back the mortgage loan, they look at your credit score.
Fair Isaac and Company formulated the original FICO score to assess creditworthines. 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. Credit scoring was developed to assess willingness to repay the loan while specifically excluding any other irrelevant factors.
Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score results from both 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 improve your score.
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 credit to calculate a score. If you don't meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.
At Bright Vision Mortgage, we answer questions about Credit reports every day. Give us a call: (904) 342-3622.