Credit Scoring

Before they decide on the terms of your loan (which they base on their risk), lenders want to find out two things about you: whether you can repay the loan, and if you will pay it back. To figure out your ability to repay, they assess your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to take into account only that which was relevant to a borrower's likelihood to pay back a loan.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score is calculated from the good and the bad in your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.

Your credit report should 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 sufficient information in your report to generate a score. If you don't meet the minimum criteria for getting a credit score, you might need to establish a credit history prior to applying for a mortgage.

Bright Vision Mortgage can answer questions about credit reports and many others. Call us: 9043423622.

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St. Augustine, FL 32092