A Score that Really Matters: The Credit Score

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Before lenders decide to lend you money, they have to know if you are willing and able to repay that loan. To assess your ability to pay back the loan, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

Fair Isaac and Company developed the first FICO score to help lenders assess creditworthines. For details on FICO, read more here.

Your credit score comes from your history of repayment. They never consider your income, savings, amount of down payment, or demographic factors like gender, race, nationality or marital status. Fair Isaac invented FICO specifically to exclude demographic factors like these. Credit scoring was envisioned as a way to assess willingness to repay the loan while specifically excluding any other personal factors.

Past delinquencies, derogatory payment behavior, debt level, length of credit history, types of credit and number of credit inquiries are all considered in credit scores. Your score is calculated from both the good and the bad of your credit history. Late payments will lower your credit score, but consistently making future payments on time will improve your score.

For the agencies to calculate a credit score, borrowers 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 report to build an accurate 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 Mason McDuffie Mortgage, we answer questions about Credit reports every day. Give us a call at (925) 271-7387.