A Score that Really Matters: The Credit Score

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

Fair Isaac and Company built the first FICO score to assess creditworthiness. For details on FICO, read more here.

Credit scores only consider the information contained in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering other irrelevant factors.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all considered in credit scoring. Your score results from both positive and negative information in your credit report. Late payments will lower your 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, you must have an active credit account with at least six months of payment history. This payment history ensures that there is enough information in your report to assign an accurate score. Should you not meet the minimum criteria for getting a score, you may need to work on a credit history prior to applying for a mortgage loan.

At Advanced Mortgage, Inc., we answer questions about Credit reports every day. Call us: (972)991-0080.