A Score that Really Matters: Your Credit Score

Before lenders make the decision to give you a loan, they need to know that you are willing and able to pay back that mortgage loan. To assess your ability to repay, they assess your income and debt ratio. To assess your willingness to repay, they use 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 (very high risk) to 850 (low risk). For details on FICO, read more here.

Your credit score comes from your history of repayment. They don't consider income, savings, amount of down payment, or personal factors like gender, ethnicity, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was developed as a way to take into account solely that which was relevant to a borrower's likelihood to pay back a loan.

Your current debt level, past late payments, length of your credit history, and other factors are considered. Your score results from positive and negative items in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will improve your score.

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

Prime Capital Mortgage Corp can answer questions about credit reports and many others. Call us: 248-644-1200.

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