About Your Credit Score

Before deciding on what terms they will offer you a mortgage loan, lenders need to discover two things about you: your ability to pay back the loan, and if you will pay it back. To assess whether you can repay, they assess your income and debt ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. You can learn more about FICO here.

Your credit score is a direct result of your repayment history. They don't consider your income, savings, down payment amount, or factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other personal factors.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scores. Your score comes from both the good and the bad of your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

Your credit report should contain 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 assign an accurate score. Some folks don't have a long enough credit history to get a credit score. They may need to build up credit history before they apply.

At The Mortgage Exchange Service LLC, we answer questions about Credit reports every day. Give us a call: 703.255-5810.

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