About Your Credit Score

Before deciding on what terms they will offer you a loan (which they base on their risk), lenders want to discover two things about you: whether you can pay back the loan, and if you will pay it back. To assess your ability to pay back the loan, they look at your debt-to-income ratio. To assess how willing you are to repay, they use your credit score.

The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (high risk) to 850 (low risk). We've written a lot more on FICO here.

Your credit score is a direct result of your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was envisioned as a way to take into account solely what was relevant to a borrower's willingness to repay the lender.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all calculated into credit scores. Your score results from both positive and negative information in your credit report. Late payments count against your score, but a 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 payment history ensures that there is sufficient information in your report to assign an accurate score. If you don't meet the criteria for getting a credit score, you might need to work on your credit history prior to applying for a mortgage.

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