About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan (which they base on their risk), lenders must discover two things about you: whether you can repay the loan, and if you will pay it back. To figure out your ability to pay back the loan, lenders look at your debt-to-income ratio. In order to calculate your willingness to repay the mortgage loan, they look at your credit score.

Fair Isaac and Company formulated the first FICO score to assess creditworthines. We've written more on FICO here.

Your credit score is a result of your history of repayment. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as dirty a word when FICO scores were first invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score comes from both the good and the bad of your credit history. Late payments count against your score, but a record of paying on time will improve it.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your report to calculate a score. If you don't meet the minimum criteria for getting a score, you may need to establish a credit history before you apply for a mortgage.

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