Credit Scores

Before they decide on the terms of your loan, lenders need to find out 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.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. We've written a lot more about FICO here.

Your credit score comes from your repayment history. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to pay while specifically excluding any other demographic factors.

Your current debt level, past late payments, length of your credit history, and a few other factors are considered. Your score is based on both the good and the bad of your credit report. Late payments lower your credit score, but consistently making future payments on time will raise your score.

Your 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 history ensures that there is enough information in your credit to calculate a score. If you don't meet the minimum criteria for getting a credit score, you might need to establish your credit history prior to applying for a mortgage loan.

Metro Mortgage can answer your questions about credit reporting. Call us: 866-300-1550.