Credit Scores

Before lenders decide to lend you money, they must know that you're willing and able to repay that mortgage. To assess your ability to pay back the loan, they assess 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 called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more about FICO here.

Credit scores only consider the info contained in your credit profile. They do not take into account your income, savings, amount of down payment, or personal factors like gender, race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to pay while specifically excluding other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score comes from the good and the bad in your credit history. Late payments count against you, but a consistent record of paying on time will raise it.

Your credit report should have 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 build a score. Should you not meet the criteria for getting a score, you might need to work on a credit history prior to applying for a mortgage.

Hometown Financial Services can answer your questions about credit reporting. Call us at (772) 252-6724.