Credit Scoring

Before lenders make the decision to give you a loan, they need to know that you're willing and able to repay that loan. To assess your ability to pay back the loan, they look at your debt-to-income ratio. In order to calculate your willingness to pay back the mortgage loan, they consult your credit score.

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

Credit scores only assess the info in your credit profile. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were first invented as it is in the present day. Credit scoring was developed to assess a borrower's willingness to repay the loan without considering 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 considers both positive and negative items in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

Your credit report must 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 credit to generate a score. If you don't meet the minimum criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

MidTowne Mortgage can answer questions about credit reports and many others. Call us at 4787462063.

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