Credit Scores

Before they decide on the terms of your mortgage loan (which they base on their risk), lenders want to know two things about you: your ability to pay back the loan, and how committed you are to repay the loan. To assess your ability to repay, lenders look at your debt-to-income ratio. To assess your willingness to pay back the loan, they look at your credit score.

Fair Isaac and Company calculated the original FICO score to assess creditworthines. For details on FICO, read more here.

Your credit score comes from your repayment history. They do not consider your income, savings, amount of down payment, or personal factors like sex race, national origin or marital status. These scores were invented specifically for this reason. "Profiling" was as bad a word when FICO scores were invented as it is today. Credit scoring was envisioned as a way to assess a borrower's willingness to pay without considering any other personal factors.

Past delinquencies, payment behavior, debt level, length of credit history, types of credit and number of inquiries are all calculated into credit scoring. Your score reflects both the good and the bad in your credit history. Late payments 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, you must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your credit to build an accurate score. Some folks don't have a long enough credit history to get a credit score. They should spend a little time building up credit history before they apply for a loan.

Metro Mortgage can answer your questions about credit reporting. Give us a call at 866-300-1550.