A Score that Really Matters: 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 figure out your ability to repay, lenders assess your debt-to-income ratio. In order to calculate your willingness to pay back the loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. Your FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score is a result of your repayment history. They never take into account your income, savings, amount of down payment, or demographic factors like sex ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess a borrower's willingness to repay the loan while specifically excluding any other irrelevant factors.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score considers positive and negative items in your credit report. Late payments count against you, but a record of paying on time will raise it.

For the agencies to calculate a credit score, you must have an active credit account with a payment history of six months. This history ensures that there is enough information in your report to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They may need to build up a credit history before they apply for a loan.

At Prime Capital Mortgage Corp, we answer questions about Credit reports every day. Give us a call at 248-644-1200.

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