Credit Scores

Before they decide on the terms of your mortgage loan, lenders want to find out two things about you: your ability to pay back the loan, and if you are willing to pay it back. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to pay back the mortgage loan, they consult 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). We've written a lot more on FICO here.

Credit scores only assess the info in your credit reports. They don't consider income or personal characteristics. These scores were invented specifically for this reason. Credit scoring was envisioned as a way to consider solely what was relevant to a borrower's willingness to pay back the lender.

Deliquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and the number of inquiries are all calculated into credit scores. Your score is based on both the good and the bad of your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will raise your score.

To get a credit score, you must have an active credit account with a payment history of at least six months. This history ensures that there is sufficient information in your credit to calculate a score. Some people don't have a long enough credit history to get a credit score. They may need to spend a little time building credit history before they apply.

Hometown Financial Services can answer questions about credit reports and many others. Call us at (772) 252-6724.