Credit Scores

Before they decide on the terms of your mortgage loan, lenders want to know two things about you: whether you can repay the loan, and your willingness to repay the loan. To understand whether you can repay, they look at your income and debt ratio. In order to assess your willingness to repay the loan, they look at your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthines. For details on FICO, read more here.

Credit scores only consider the info contained in your credit profile. They do not consider your income, savings, amount of down payment, or demographic factors like sex ethnicity, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as dirty a word when these scores were invented as it is today. Credit scoring was developed as a way to take into account only that which was relevant to a borrower's willingness to pay back the lender.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated wtih both positive and negative items in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.

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

At Metro Mortgage, we answer questions about Credit reports every day. Give us a call: 866-300-1550.