Credit Scoring

Before lenders decide to give you a loan, they want to know that you're willing and able to pay back that mortgage. To understand your ability to repay, they look at your income and debt ratio. In order to assess your willingness to repay the mortgage loan, they look at your credit score.

The most commonly used credit scores are FICO scores, which Fair Isaac & Company, a financial analytics agency, developed. The FICO score ranges from 350 (high risk) to 850 (low risk). For details on FICO, read more here.

Credit scores only consider the info contained in your credit profile. They never take into account income, savings, amount of down payment, or factors like sex race, nationality or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when these scores were first invented as it is today. Credit scoring was envisioned as a way to take into account solely that which was relevant to a borrower's likelihood to repay the lender.

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

Your credit report should 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 payment history ensures that there is enough information in your credit to generate an accurate score. Some people don't have a long enough credit history to get a credit score. They should build up a credit history before they apply for a loan.

American Mortgage Services can answer questions about credit reports and many others. Give us a call: 9018401400.