About Your Credit Score
Before lenders make the decision to give you a loan, they want to know that you are willing and able to repay that mortgage. To understand whether you can repay, they look at your income and debt ratio. To assess your willingness to repay the loan, they consult your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.
Your credit score comes from your repayment history. They don't take into account your income, savings, amount of down payment, or demographic factors like sex race, nationality or marital status. 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 assess a borrower's willingness to pay without considering other demographic factors.
Past delinquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score is calculated wtih positive and negative information in your credit report. Late payments lower your score, but consistently making future payments on time will raise your score.
For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This payment history ensures that there is enough information in your credit to build a score. Should you not meet the minimum criteria for getting a credit score, you may need to work on your credit history before you apply for a mortgage.
At C2 Financial Corporation, we answer questions about Credit reports every day. Call us at (727) 478-2797.
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