Credit Scoring

Before deciding on what terms they will offer you a loan, lenders must know two things about you: your ability to pay back the loan, and if you are willing to pay it back. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to repay, they use your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. Your FICO score ranges from 350 (very high risk) to 850 (low risk). We've written more about FICO here.

Credit scores only consider the information in your credit reports. They never consider your income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. Fair Isaac invented FICO specifically to exclude demographic factors. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering other irrelevant factors.

Your current debt load, past late payments, length of your credit history, and other factors are considered. Your score reflects the good and the bad in your credit report. Late payments will lower your credit score, but establishing or reestablishing a good track record of making payments on time will improve your score.

To get a credit score, borrowers must have an active credit account with at least six months of payment history. This payment history ensures that there is sufficient 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 should build up credit history before they apply for a loan.

Washingtonian Mortgage, LLC can answer your questions about credit reporting. Give us a call: 410-451-2755.