About Your Credit Score
Before deciding on what terms they will offer you a mortgage loan, lenders need to find out two things about you: whether you can pay back the loan, and if you are willing to pay it back. To assess whether you can repay, they assess your income and debt ratio. To assess your willingness to pay back the mortgage loan, they consult your credit score.
The most widely used credit scores are called FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can find out more about FICO here.
Your credit score is a direct result of your history of repayment. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. These scores were invented specifically for this reason. Credit scoring was developed to assess a borrower's willingness to repay the loan while specifically excluding any other irrelevant factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score is calculated from both the good and the bad in your credit report. Late payments count against you, but a consistent record of paying on time will raise it.
Your report must contain 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 payment history ensures that there is enough information in your credit to calculate an accurate score. If you don't meet the minimum criteria for getting a score, you might need to establish your credit history before you apply for a mortgage loan.
Washingtonian Mortgage, LLC can answer your questions about credit reporting. Give us a call: 410-451-2755.