Credit Scoring

Before lenders make the decision to give you a loan, they must know that you're willing and able to pay back that mortgage loan. To figure out 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.

Fair Isaac and Company formulated the original FICO score to help lenders assess creditworthines. You can find out more about FICO here.

Credit scores only assess the info in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to take into account only what was relevant to a borrower's willingness to pay back the lender.

Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scoring. Your score results from both positive and negative information in your credit report. Late payments count against you, but a consistent record of paying on time will improve it.

Your report must 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 history ensures that there is sufficient information in your credit to build a score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building a credit history before they apply for a loan.

At Ann Jones (512) 422-9036, we answer questions about Credit reports every day. Give us a call: (512) 422-9036.

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